Our ...November Newsletter 2010
Welcome to our November newsletter, the last one for 2010.
The recent Panorama programme on ‘Who took my Pension’ highlights the points made in our September newsletter regarding the importance of reviewing what you have in place, not just from a charges point of view, but also to ensure that the investment choice remains appropriate.
In this issue:
- Cause for a quick review – current issues & budget updates relevant to us all….
- Protecting your finances against serious illness – how can you do this, and what to be aware of…
- The Equality Act 2010 – a whistle stop tour of the significant changes an employer should be aware of…..
The coalition government has committed to addressing around 80% of the structural deficit through spending cuts rather than tax increases. However, the recent Comprehensive Spending Review will still have tax planning implications.
The most obvious change is for pensions, with the Government equalising the State retirement age for men and women from 2018. It will then rise to 66 by 2020, four years ahead of previous plans. The age for private pensions remains 55 – up from 50 earlier this year – but any private pension will have to supplement the State pension for longer.
Chancellor George Osborne confirmed the National Employment Savings Trust (NEST) will proceed so auto-enrolment for workplace pension schemes will start as planned in 2012. If your practice needs to know more about how NEST will affect your business please click here.
For the time being, high earners will continue to be paid tax relief on pension savings at the highest rate at which they pay income tax. The Government is still consulting on plans by the previous administration to reduce the tax relief available on pension contributions for people earning more than £150,000.
However, the Chancellor made it clear that business tax rates would remain low, meaning the marked differential with income tax remains and tax-planning opportunities exist for entrepreneurs. This is unlikely to change as Osborne is looking to the private sector to make up the short-fall in employment created by public sector job cuts. However, the January 2011 VAT rise is still on.
The majority of tax incentives also remain – for now. The Government has said that ISA’s are safe – with contribution limits rising £480 to £10,680 for the 2011/12 tax year – and indeed is considering creating ‘Junior ISA’s’ to replace the Child Trust Fund. Entrepreneurial incentives such as VCT’s are untouched too but the Chancellor stressed he would be tightening up on tax evasion of all kinds. More than ever, investors need to ensure their financial affairs are in order.
One way to protect against serious illness is by having Critical Illness cover. It is a form of insurance protection which pays out a lump sum if you are diagnosed with one of a specific set of serious illnesses.
The illnesses covered are the kind which will have a significant impact on your lifestyle or require it to change and, for example, generally include a heart attack, stroke and debilitating forms of cancer.
The idea of critical illness is that it takes the financial stress away at a time when you might not be able to work for an extended period – or perhaps have to change job to one which pays less money. The plan pays you a lump sum and this can be used to perhaps reduce existing costs, such as your mortgage, or finance changes which might be required to your home. Alternatively, it might simply pay for an extended holiday to aid recuperation.
Whole Life or Term?
There are two types of critical illness policy – ‘whole of life’ and ‘term’ cover. As the names suggest, whole of life is designed to cover you for as long as you live whereas term is for a fixed period, usually 10 or 25 years and might be used to tie in with a fixed term liability such as your mortgage.
The conditions covered by critical illness cover remain a huge discussion point in the insurance sector as the small print does vary between providers. The Association of British Insurers (ABI) has moved to ensure some uniformity by publishing a list of 23 definitions of critical illnesses, but there are some insurers around who offer more than this.
As well as the obvious, the ABI list includes Alzheimer’s, blindness, motor neurone disease and kidney failure. However, whilst this might seem straightforward, there are also several conditions which are excluded, or make a claim invalid – for example: drug abuse, Aids and, in some cases, contracting a terminal illness while living abroad. Some types of cancer may also not be covered – and it is therefore very important that you understand exactly what you are getting.
‘Guaranteed’ Rate or ‘Subject to Review’?
The other main issue to be aware of when buying a policy is whether your rates are guaranteed or subject to review. Guaranteed rates offer a set premium for the life of the policy whereas reviewable rates may be changed from time to time (usually annually) if the provider considers the risk levels they originally assumed have changed.
Sadly, cases do still crop up where the policyholder, having been diagnosed with a serious illness, discovers it is not covered by their policy. Robust, independent financial advice and a willingness to be open about your medical history are therefore a must when applying for this type of cover.
If this is something that you haven’t considered before, but would like to know more about the cost why not contact us, and if Critical Illness cover is appropriate for your needs Jackson Jeffrey Financial Services Ltd can obtain a no obligation quotation. Please email us for further information.
The Equality Act 2010….a whistle stop tour of the significant changes an employer should be aware of
The Equality Act 2010 was introduced on the 1st October 2010. It essentially harmonises, consolidates and simplifies 9 previous major pieces of legislation and 2,500+ pages of guidance notes and codes of practice.
The Act provides that 9 characteristics are ‘protected’ and are now referred to as the protected characteristics:
Whilst the protected characteristics are the same as those governed by previous legislation, the Act will nevertheless have a significant impact on employer’s recruitment procedures and employment policies and practices, which will undoubtedly need to be reviewed and updated.
The Act in some cases introduces new definitions of discrimination or widens the existing definition, but in particular, introduces two new forms of discrimination in relation to most of the protected characteristics.
The first of these is discrimination by association. This is where someone is the recipient of less favourable treatment on the basis of someone else’s protected characteristic rather than their own. The second relates to discrimination by perception. This is where someone received less favourable treatment because it is thought that they possess a protected characteristic.
The Act also introduces a new definition in relation to harassment and extends the liability of employers for third party harassment to all of the protected characteristics, with a focus on a ‘three strikes’ scenario and an employer’s failure to take appropriate measures to prevent the harassment.
One of the more controversial changes which the Act brings about is the fact that it makes it unlawful (other than in a few exceptional circumstances) for employers to ask questions about an applicant’s health before an offer of employment is made to them.
Finally, the Act puts a ban on Employers including a blanket pay secrecy clause in a contract of employment and employees are now permitted to disclose their salary to colleagues for the purposes of determining whether discrimination is taking place.
De Marco Hunter is currently helping their clients ensure policies and procedures are updated to reflect these changes, and would be pleased to assist with any queries you may have.
Lianne Payne, Partner
De Marco Hunter Solicitors
Specialists in Employment Law
Tel: 024 7621 4440
Fax: 024 7699 8273
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