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Welcome to our September newsletter. This edition includes important information regarding reviewing your pension (we have recently received lots of enquiries in this area) and an interesting article on how your postcode determines your retirement income.

We also have a useful reminder about Professional Indemnity insurance – an important subject for many of you – kindly supplied by Peter Cross, Managing Director of Cross & Co (Insurance Brokers) Ltd.

• How long is it since you reviewed your pension?  Read more..
• Does my postcode really help determine my income in retirement?   Read more..
• Why you should consider Group Income Protection for your employees.   Read more..
• Professional Indemnity Insurance – what to be aware of.   Read more..

If you haven’t received our newsletter before, you can download your 2010/2011 tax tables, updated following the Budget in June. This should be the only set of tables you need for all personal and business taxation rates.

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If you would like any further guidance or advice regarding the subjects raised in this newsletter please click here and we will be pleased to help.

How long is it since you reviewed your pension?

Here at Jackson Jeffrey we frequently advise new clients whose pensions make up the largest element of their (non property) wealth. Yet, often they will come to us without a clear understanding of where the money in their pension is invested, whether that is appropriate, and how much it is worth.

Was the last time you looked at your pension(s) over 12 months ago? If so you should really consider reviewing it now. If your pension is a ‘money purchase pension’* (personal or occupational) you should know how your money is invested and whether this remains appropriate based on your personal objectives.

It is commonplace for someone to commence a long term investment (such as a pension) choosing higher risk funds (e.g. with exposure to shares in companies) that are appropriate at that time. As the years pass by though our attitude may alter and we may become less inclined to take risk, instead seeking less volatile investment options.

This is because we may have fewer years for our money to recover in the event of a downturn in the investment market. Even if you have temporarily stopped paying into your pension(s) or haven’t made any contributions for years a review should still be carried out.

We sometimes have clients who started ‘contracted out** personal pensions’ back in the late 1980’s, but can’t find any paperwork relating to it or remember who the pension provider was. Not only that, there have been many pension provider mergers and name changes over the years, making it even more confusing to keep track of things. If you need help finding out whether you are contracted out and with which provider click here.

You should have a reasonable idea how much your pension is worth, now, and also what it is projected to provide you with in retirement. This will help you plan for retirement and gain an understanding of whether the level of income (combined with any other savings or investments) will provide you with the standard of living you require.

Without regular reviews it is impossible to know, and leaving this until reaching retirement will be too late, because at that point there is no chance to make any changes.

*A money purchase pension covers all types of pensions other than Final Salary Schemes.
**Contracted Out or ‘Appropriate Personal Pension Plans’ are pensions specifically for those contracting out of the State Second Pension (previously SERPS – State Earnings Related Pension Scheme).

Does my postcode really help determine my income in retirement?

When reaching retirement one way of releasing an income from your pension is to purchase a lifetime annuity. This is where you convert your pension into an income for the rest of your life.

With inflation and interest rates at a historic low, and also the fact that people are living longer, lifetime annuities are more expensive and therefore return rates have declined considerably over the years.

Traditionally the annuity provider would base the level of income they would pay on age, gender and size of pension pot. Now they will take into account postcode and any health impairments to build a more accurate picture of life expectancy.

So, postcode really can help determine the level of income you receive in retirement, as studies have shown that where someone lives really can have an effect on their longevity. Furthermore, the level of income is determined based on where you live at the time of purchasing the annuity – it doesn’t alter if you subsequently move!

Enhancements for impaired health also help determine the level of income, for example if someone has been a smoker for the past 20 years, or has a severe medical condition this can have a positive effect on the income payable. In any case when reaching retirement, your Independent Financial Planner should explore this with you and discount it if it’s not appropriate.

If you are considering taking benefits from your pension, we can help. Jackson Jeffrey Financial Services provide independent advice regarding the various retirement options available.

Why you should consider Group Income Protection for your employees

The perception that group risk benefits only benefit the employee not the employer has changed over the years. Employers recognise that it is not only the salary they offer that helps to attract and retain good employees.

Whilst Group Life (Death in Service) continues to be the most common risk benefit, traditionally seen by employers as an inexpensive benefit to offer staff (with a high perceived value) Group Income Protection is certainly something for all employers to seriously consider.

Group Income Protection really does provide a benefit for the employer as well as the employee. This benefit provides a replacement salary if someone is unable to work after an initial ‘deferred period’. Some providers offer the salary replacement for a set period (e.g. 2 or 5 years) however often the benefit runs to retirement age.

One of the most important benefits is the transfer of long-term absence from the business to the insurer. On average the cost of providing this benefit is 1% of payroll, but what would be the true cost of long-term absence for your business?

If you take into consideration the cost of paying employees who are off sick, and the loss of productivity, the cost of a Group Income Protection policy could actually be an attractive option. A single claim for a small or medium sized company could cause serious hardship and longer term threaten the financial security of the business if there is no provision in place to fund such situations.

The other advantage to the business of implementing a group policy is the tax advantage of being able to offset the cost of cover as a business expense.

Some of the Group Income Protection providers have increased their assistance over the years, and many will now intervene early for employees who are likely to be off sick for sometime which can involve them funding medical treatment to help the employee return to work sooner than expected.  Many of the providers also offer employee and/or employer assistance programmes to provide a number of additional services, such as legal and HR information (for the employer) and counselling, proactive debt management, and rehabilitation programmes (for employees).

Jackson Jeffrey Financial Services provide advice regarding implementation and review of Death in Service, Critical Illness, Group Income Protection and Private Medical Insurance to small and medium sized businesses (up to 500 employees).  If you are due to review your existing schemes, or simply want to explore the cost of starting something now please do not hesitate to contact us.

Professional Indemnity Insurance

Professional Indemnity Insurance provides cover for claims brought against the policyholder for breach of professional duty, negligence, error or omission.

Protecting your business with the correct Insurance coverage is absolutely vital, which not only means that you receive correct advice on limits of indemnity, clauses and extensions from an Insurance Broker experienced within the Financial Risks Insurance sector, it also means that your insurer needs to be fully aware of all the activities undertaken which includes being kept immediately informed of any diversification of an existing activity or even carrying out business within a new territory to ensure that these are included in the scope of cover.

In addition it is essential that insurers are made aware of any potential claim that could be made against you, as most insurance policies will have a condition written into the cover obligating you to provide this information within a strict time limit (normally immediately).

Even though we are still experiencing the effects of the recession the current Professional Indemnity Insurance market is quite soft, I would therefore recommend you encouraging your broker to seek potential alternatives at renewal.

Cross & Co (Insurance Brokers) Ltd have a wealth of experience within all areas of Corporate Insurance including Professional Indemnity Insurance and would be pleased to help you with any enquiry you may have.

Peter L Cross
Managing Director
Cross & Co (Insurance Brokers) Ltd

The contents of this newsletter do not constitute advice and should not be taken as a recommendation to purchase or invest in any of the products mentioned. Before taking any decisions, we suggest you seek advice from a professional financial adviser. All figures and data contained within this document were correct at time of writing.
The guidance contained is subject to the UK regulatory and taxation regime and is aimed at consumers who are based in the UK.