Anniversary/ 25 years or a quarter of a century in Financial Services?

It all comes to pass in December 2010

It is hard to believe that in the winter of 1985, a spotty teenager (namely me!) joined a bank in a small branch in Surrey and began his career in Financial Services. As we draw towards the winter of 2010, I can look back over a quarter of a century of unbroken service in UK retail financial services.

25 years later, the world has changed since that cold December morning when I rolled up for my first day, having experienced my first dose of redundancy the week before. We have moved from the Margaret Thatcher era with the promotion of financial services, Big Bang and Black Monday, through the Blair/Brown ‘New Labour’ years of ‘no more boom and bust’ to what appears to be a time of austerity under the Coalition Government of Messer’s Cameron and Clegg.

In financial services, we have seen everything from the PIA to the FSA to MIRAS to LAPR and QE to the banking crisis, recession and now, as already noted, austerity. We seem to love our acronyms, don’t we! I have gone into more detail about my personal journey through these changes in my first book, Sign Here, Here and Here!…Journey of a financial adviser (Available from Waterstones/Amazon)

It has been a pleasure to serve the public in such a diverse and dynamic role and I am looking forward to the next 25 years. I will be aged 68 by the end of this time and based on the way the minimum State Pension age is increasing, I should be just in time to sign off after 50 years and collect my State Pension at that stage, if it still exists. With careful planning, most should be able to enjoy a comfortable retirement.

The best part of the journey for me has been the customers and clients that I have looked after in that time. They make the whole profession worthwhile and I thank them for the trust that they have placed in me and my company, Churchouse Financial Planning Limited, over the 6 years that we have been offering our financial solutions. A big thank you to you all, both past, present and future and I look forward to the next few decades and the challenges that these will bring.

We are all different and therefore, this article should not be seen or used as individual advice. Seek Independent Financial Advice (IFA) for your circumstances.

Further details of the book and our service are available at our websites, www.signherehereandhere.co.uk or www.churchouse.com

Keith Churchouse, Chartered Financial Planner

ISO22222 Certified Financial Planner

Director of Churchouse Financial Planning Limited

Churchouse Financial Planning Limited is authorised and regulated by the Financial Services Authority. The Financial Services Authority does not regulate taxation advice.

Don’t forget your State Pension Benefits when getting divorced

When you are going through a divorce and considering your financial settlement then you should not forget the benefits available under the State pension scheme.

This might seem to be the least of your worries, but with a current value of £97.65 per week (2010/2011) without any additions (that’s just over £5,000 per annum gross to you and me!), it could have high value in your dotage.

Considering that most of us will make to around our mid eighties, this means that we could get this benefit for around twenty years. We also have to take into account the news from the Comprehensive Spending Review that all State Pension benefits from 2020 will only be available from age 66, rather than 65.

This is the same if you have not been working during the course of the marriage, as you will see.

Let’s look at the issues.

1. Basic State Pension…..and possible additions?

You may not know that there are usually two types of state pension that may be accrued, namely the Basic State Pension and the State Earnings Related Pension) (SERPS) or Second State Pension) (S2P) as it is now called.

This may be particularly relevant if the divorce happens close to the end of a working life, as many over 50’s are finding.

Most people are entitled to some form of state pension at any age from 60 for women and from 65 for men. This age is rising to age 66 from 2016 for men. The minimum age for the state pension is equalising for all to age 65, and then this is likely to increase further to 67 or 68 in future years.

Have you ever found out what your benefit is worth? The benefits available can be checked by completing a BR19 State Pension Forecast form, which will tell you what you are entitled to, both now and in the future.

Your spouse should also be entitled to individual pension benefits.

On divorce, there is the potential to transfer some of the State Pension Benefits to your ex-spouse dependent on your circumstances and this may be required as part of a divorce settlement.

To find out the transfer value of any benefit you can request this information from The Pension Service in Newcastle using an original BR20 form, one for each party. They don’t like photocopies and the valuation is valid for twelve months.

2. Forms and independent advice

Both are easy to check and the BR19 Pension Forecast Form and the BR20 Form are available on The Pension Service website, www.thepensionservice.gov.uk.

Whether or not you are divorcing, it’s always worth checking your State Pension to make sure you are maximising the pension benefit that could be available to you.

For married couples, I would usually recommend that both parties check to ensure that the household will benefit from this income.

Your Independent Financial Adviser (IFA) can also look at this information for you to see if there are any shortfalls in the value and if this can be added to with extra contributions.

This information should be explained in the detail. It’s just a question if it offers good value and this is where advice is vital.

3. Tax on the income

You knew that income tax will come up somewhere.

Currently the income from the State Pension is paid gross to the recipient, but is taxable. This may mean that any other earned or pension income you receive above the State Pension has a greater tax charge to take account of the State Pension already in payment.

4. Contribution records and State Pension Benefits after divorce

I hope that your financial negotiations have gone as well as you planned. Remember, you pay to argue.

When the divorce is finalised and completed, you can re-check the State Pension benefits available to you, to see whether they have changed.

As a point of interest, you may see an increase in your benefits if your spouse’s National Insurance contribution record was higher than yours as they may use this record as a substitute.

Again, you can use a BR19 form for this, updated with the concluded changes, such as the fact that your marital status is now ‘divorced’ and the date of the divorce. The detail comes back in around a month’s time, however the time taken can vary.

5. Further details

Divorce can be a difficult and emotive time, but with some focus and quality advice, I hope that you reach your objectives. Thsi article should not be seen or used as individual advice.

To expand on all things divorce and the fundamentals, I have been able to outline the full process in my new book, Addicted to Wedding Cake, The Journey of Divorce.

Further details of this are available at our websites, www.addictedtoweddingcake.co.uk or www.churchouse.com.

Keith Churchouse is Director of Churchouse Financial Planning, a firm of Chartered Financial Planners in Guildford, Surrey. Keith is a Chartered Financial Planner and Certified Financial Planner (CFP) professional. Churchouse Financial Planning Limited is Authorised and Regulated by the Financial Services Authority.

Probably not such an Equitable Life ‘Henry’!/ Compensation finally looms

It is nearly 10 years since the demise of what was declared the ‘oldest mutual organisation in the world’, first formed in 1762. And in a variation to many of the ‘Henry’ clients portrayed in the television adverts, it turned out not to be such an Equitable Life after all. Sadly, it is estimated that some 50,000 policyholders have died waiting for any form of compensation to be paid since 2000(Source/Report: Daily Mail, July 2010).

Finally, this week, it is reported that the details of a £1.5 billion compensation package will be announced and finalised by the Coalition Government after nearly a decade of delays, enquiries, arguments and disagreements, including investigations by the Parliamentary Ombudsman. This is way short of the £6.0 billion package that many felt was required. Although this announcement will be a momentous occasion in itself, I am not sure it will make the top headlines it deserves because it will come in the Comprehensive Spending Review that will have many other (mainly negative) headlines of its own. Wednesday the 20^th October 2010 will be a day of history whatever happens.

And what now for the policyholders? Bearing in mind that the with-profits fund at the end of 2000 had an estimated value of around £26 billion (source: Wikipedia), you might see that the proposed £1.5 billion in the big picture may not spread very far, although admittedly something is better than nothing! I understand that they may start to provide compensation to those who have or are suffering ‘hardship’ and this might, as an example, include those that took out a with profits annuity which has seen the income first projected fall away over the years. Others who have not suffered any ‘hardship’ but seen their investment bond, pension (executive pensions/ Section 32/retirement annuity) or income drawdown go down in value may find themselves lower down the pecking order of compensation payments. I have no doubt that the devil will be in the detail on this one, but I believe that the principal of priority list is correct.

We are likely to know after Wednesday. I am only sad that it has taken so long to get this far.

Whatever the outcome of the Equitable Life compensation scheme and its subsequent effects, it is always worth seeking independent financial advice (IFA) to ensure that you are getting the best from your financial planning.

This article should not be treated as individual advice. Individual advice is only available based on your individual circumstances. Further information, advice and contact details are available at our websites, www.churchouse.com or www.planmypension.co.uk

Keith Churchouse, Chartered Financial Planner

Director of Churchouse Financial Planning Limited

Churchouse Financial Planning Limited is authorised and regulated by the Financial Services Authority. www.planmypension.co.uk is a trading name/style of Churchouse Financial Planning Limited.

CHURCHOUSE is a trademark of Churchouse Financial Planning Limited.

H M Treasury reveals new pension restrictions

Just when you thought is was safe to save for your retirement , HM Treasury has today revealed its plans to change the restrictions on pension accumulation to lower levels.

The Coalition Government confirmed in June that it wanted to reform pensions tax releif and these new changes will come into force.The HM Treasury website quotes the following points: ‘On the 14th October the Government announced that, from April 2011, the annual allowance (AA) for tax privileged pension saving will be £50,000 and that from April 2012 the lifetime allowance (LTA) will be £1.5million.’

The basic changes are as follows:

Lifetime allowance

Was Reducing to (April 2012)

£1,800,000 £1,500,000

Annual Allowance

Was Reducing to (April 2011)

£255,000 £50,000

It has been noted that there may be transitional arrangements for those close to or above £1,500,000.

If you have the benefit of a final salary scheme and see a significant jump in your salary you could see yourself facing a tax charge. This may be the same if you want to make a large contribution to a personal pension plan or money purchase pension plan.

Fuller details can be found at www.hm-treasury.gov.uk/press

If you are or are potentailly effected by these arrangements then early planning is recommended to ensure that you are not adverserly affected by these changes.

Speak to Churchouse Financial Planning Limted on 01483 578800

This should not be seen as individual advice and you should speak to your independent financial adviser (IFA) about your individual circumstances and needs.

Keith Churchouse
Chartered Financial Planner
ISO22222 Certified Financial Planner

Churchouse Financial Planning Limited is Authorised and Regulated by the Financial Services Authority.

CHURCHOUSE is a trading name of Churchouse Financial Planning Limited

Comprehensive Spending Review…It might be personal!

Is it me, or is the whole of the UK waiting for the sword of the Governments Comprehensive Spending Review to fall and make the proposed cuts that so many print pages have been exhausted over in the last few months. Whichever way the cuts are made, I am sure that it is not going to be a pretty sight on the 20th October 2010. Let’s see what George Osborne has to say.

In a simplistic way, any business manager or owner will tell you that there are only two real ways of managing a business. One is to keep costs low and income high. Sprinkle some cash flow in between and away you go. Balancing the budget of the UK is likely to be very much more complicated, throwing in things such as additional bouts of quantitative easing and keeping our sterling currency sound, however, the principals are the still similar.

This is all very interesting to economists, but what does it mean to the person on the Omnibus? Clearly cuts are likely to lead to reduced spending and this may lead to cost cutting with the reduction of manpower. Redundancy, unemployment, severance packages and employment are likely to be key words in the winter and not for the right reasons. I am sure the employment solicitors/lawyers will be busy! All gloomy reading, but what can the person on the Omnibus do to help ensure that he or she is financially ready if this is to be last trip on the bus for a while?

Returning to the analogy of how a business works, they can entertain the same logic of looking at reducing or cutting outgoings and increasing income. I have expanded on this below with a few examples, although this list is not exhaustive:

Budgeting

Irrespective of your circumstances, it is always worthwhile looking at your household budget to ensure that you are extracting value from your outgoings. It’s worth doing this regularly and don’t wait for a redundancy to arrive to find out that you can’t afford to make ends meet.

Your household will need to ‘buy in’ to the process, and keep your debts under control and make sure you maintain an emergency deposit fund of 3-6 months income available to meet any short term liabilities as they arise. You might want to use a Cash ISA (ISA) arrangement to achieve this, or, as an alternative, Premium Bonds, which offer tax free winnings. If your spouse has a lower income tax band than you then you might want to consider having any taxable savings in their name.

Income

If you are fortunate enough to have a few investments behind you then check if these can provide you with income if needed. You might want to leave any pension benefits untouched until you retire, but seek independent financial advice (IFA) if you have this potential fallback position. Approximately half way through the tax year 2010/2011, as October is, might be a good time to review your ISA’s and Capital Gains Tax position (CGT) if you have one and make any necessary changes to meet you current circumstances and any future situations.

Summary

Whatever happens, as we move into these times of austerity, make sure that you keep your financial planning up to date and ready to meet your needs.

This should not be seen as individual advice and you should speak to your independent financial adviser about your individual circumstances and needs.

To expand on the issues of business planning for SME’s and the fundamentals, I have been able to outline the full process in my new book, Sign Here, Here and Here!…Journey of a Financial Adviser.

Further details of this are available at our websites, www.signherehereandhere.co.uk or www.churchouse.com

Keith Churchouse, Chartered Financial Planner

Director of Churchouse Financial Planning Limited, High Street, Guildford, Surrey

Churchouse Financial Planning Limited is authorised and regulated by the Financial Services Authority

Redundancy, a life junction?

Having been made redundant twice myself in the past, I know that this situation can be emotional, stressful and daunting. Sadly, with the current austerity cuts proposals of the coalition Government in their comprehensive spending review, we may see an increase in this situation occurring.

If you find yourself in this position, then it might be worth taking some financial planning measures early to ensure that you try and get the best from the situation.

First of all, you may receive a redundancy payment. The first £30,000 of this should be paid tax free, as long as it is a true redundancy situation. If your departure from work is not deemed to be a redundancy, such as a severance agreement, then the tax situation may be different. Please check this point before agreeing to leave an employer. Any balance above £30,000 will be taxed at your highest marginal income tax rate. As tax year starts in April, and if we think that it is now October, then we are seven months into a tax year. Therefore, if you add the payment above £30,000 to your earned income so far, you may well find that you will be taxed at 40%, however check this with an accountant or tax adviser because all of our circumstances will be different.

Dependent on your situation, you may want to offset part of the tax on any excess redundancy payment by contributing to a pension. If you have an employer’s scheme, such as an AVC, money purchase or Executive Pension scheme, then you may need to arrange this before you leave service. Therefore, some early planning in the negotiation phase may well be worthwhile. For this financial planning, you should seek Independent Financial Advice (IFA).Although this may be tax efficient, take account of your cash flow situation. Planning for your immediate future is vital.

With the potential of no income coming in for the short term, you are still need to meet the cost of your liabilities and this has to come first. You may want to check any policies that may pay out in the event of redundancy. Some of these plans require you to apply for Benefits and you may plan to arrange this anyway. Also remember that you may be losing other benefits by leaving your employer, such as death in service and ill health/ medical insurance cover. You should check this to ensure that the protection levels you require are maintained.

Others may have reached an age where drawing pension benefits may be an option. Seeking good financial advice at an early stage is important to make sure that this planning is arranged correctly. You may want to use tax free cash and income to replace the income lost from employment. If you are looking at this, then it may well be worth your while checking your state pension benefits, and that of your partner/spouse if you have one, to ensure that you know what these can offer. You can do this by using a BR19 State Pension Forecast form and this can be found here.

Redundancy can be seen as a life junction and possibly an opportunity to reinvent your future employment situation. You may choose to start your own business and, as an aside, Surrey Chambers of Commerce can help you with this. I have detailed my own personal experiences in my book, Sign Here, Here and Here!...Journey of a Financial Adviser.

We are all different and therefore, this article should not be seen or used as individual advice. Seek Independent Financial Advice for your circumstances.
Further details of the book and our service are available at our websites, www.signherehereandhere.co.uk or www.churchouse.com

Keith Churchouse
Director of Churchouse Financial Planning Limited
Churchouse Financial Planning Limited is authorised and regulated by the Financial Services Authority. The Financial Services Authority does not regulate taxation advice.