Time to get busy....Redundancy and the loss of employment

The loss of employment through redundancy or otherwise can for many be a very worrying time. This Life Junction as I refer to them draws you to a halt at a certain point in your life and asks you to consider the options available to you and, most importantly, which way you turn. I have provided some thoughts below.

Retirement/Early Retirement?

The way you turn may well depend on your current circumstances. As an example, if you have reached an age that was close to your anticipated retirement time, you may decide not to look for further employment because of the current economic climate and look at drawing pension benefits. If you received a redundancy payment then you may use this to subsidise your lost income over a time until you do draw pension benefits or until you find new work and income/salary. You may have sufficient tax free cash and taxable pension income to solve your financial needs into the future and an early look at the planning of this is recommended. You should seek independent financial advice to ensure that you have considered all of the varying options.

Redundancy Payments

Please remember that the first £30,000 of any redundancy payment is tax free with the balance being taxed at your highest marginal income tax rate. This may mean that if you are being made redundant in the early part of a tax year (tax year starts on 06^th April) you could find that any amount being paid above the tax free limit (£30,000) is taxed at basic rate tax (currently 20%) up to the new tax threshold of £42,475 (in the tax year 2011/2012). Make sure you keep hold of any tax documents, such as your P45, for future reference. Also, you may want to offset part of the tax on the excess payment by making a pension contribution. This may be achieved by your own arrangement or through your employer before you leave employment. You should take financial advice on this subject promptly if you wish to look at this option.

Further details on how any income tax liability may be calculated is detailed at the HMRC website here: http://www.hmrc.gov.uk/individuals/redundancy-ee.htm

Emergency Deposit Funds

One financial planning point I would recommend to most clients is to consider maintaining an emergency deposit fund, a fund of readily available cash/deposit funds, of around 3-6 months income to cover unexpected expenses. This might be the car breaking down or the roof leaking. Whatever it is, this fund should be sufficient to cover the cost of unexpected and possibly unwanted liability. Bear this in mind when planning and allocating any redundancy payment you may receive.

Benefits

On a more practical note, I am sure you will be polishing up your CV to send to potential employers and you may be entitled to some State benefits, such as unemployment benefit/Job Seekers allowance. It is usually worthwhile looking at what this involves, especially if finding the right work in your chosen field may be difficult.

One useful website to look at this further is the DirectGov website here: http://www.direct.gov.uk/en/MoneyTaxAndBenefits/BenefitsTaxCreditsAndOtherSupport/Employedorlookingforwork/DG_10018757

Protection Policies

You should also look at the terms of any existing protection policies that you may have that could help towards to payments of any outstanding debts that you have. Your outstanding debts and liabilities will need to continue to be serviced even if you are unemployed and early financial planning for this is important.

You may have also lost other benefits on leaving your employment. Some may be tangible, such as the company car, which will now need to be replaced, however, some are less tangible. You may have lost your Death In service life cover (DISB), private medical health insurance (PMI), ill health income replacement cover and ongoing pension contributions. If you and your family need to maintain these protection covers, then do look at the continuation/replacement options available to you at an early stage.

Start your own business?

You may decide that now is a good time to start your own business, with all the knowledge, wisdom and expertise that you have accumulated in your role in the past. There is much help on offer from various organisations to allow you to achieve exciting option and any recent redundancy payment may give you sufficient cash flow to achieve this.

Another useful website if you want to look at the way this could work and what help is available is through Business Link at: http://www.businesslink.gov.uk/bdotg/action/getStarted

Summary

Overall, you can see that early planning is vital to ensure that you are ready for the Life junction that is redundancy and the loss of employment. Whatever route you chose, I wish you prosperity and every success into the future.

As I have noted in previous blogs, we are all different and your ongoing financial planning strategy will be individual to your needs, such as the use of a redundancy payment in your circumstance. Therefore, this article should not be seen or used as individual advice.

Churchouse Financial Planning is not responsible for the content of an external web pages noted above.

Seek Independent Financial Advice (IFA) for your circumstances. Churchouse Financial Planning Limited can be contacted in Guildford, Surrey on (01483) 578800.

Keith Churchouse

Director of Churchouse Financial Planning Limited, Guildford, Surrey.

ISO22222 Certified Financial Planner & Chartered Financial Planner

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

Weddings, marriage and all things financial….5 things to consider!

My best wishes to Prince William and Catherine Middleton on their big day at the end of this month and for their futures together. Wedding fever is likely to build as we approach the end of April 2011 and the Royal couple will not be alone in their preparations, with many marriages planned for the coming spring and summer months in 2011 and beyond.

Obviously, with a wedding or civil partnership, there is much to prepare, from flowers to outfits, wedding breakfasts and cars to speeches and making sure that all the invites have been safely delivered and the various responses gathered in. The frenzy of activity will build until the big day arrives and all hopefully runs smoothly.

With all this focussed effort occurring, it is sometimes easy to forget some of the financial planning that should also be considered, and this is understandable. To help, I have listed below some of my financial tips on what to look at as any happy couple approach their union and future together.

1. Financial gifts on marriage (Inheritance tax)

Parents, and other relatives, may well be pleased to provide the marrying couple with a wedding gift of money on their marriage. For parents, they can give £5,000 to their child with the gift falling outside their estate for inheritance tax purposes at the time of the gift. Grandparents can also undertake a similar gift, limited to a level of £2,500.

This is over and above the normal annual gift allowance of £3,000 in a year.

2. Pension nominations on death before retirement

If you have collected a pension or two in your working life, or are a member/owner of a pension now, you may have made a nomination on the plan in the event of death before you retire. If your plan was started when you were young and before you met your soon to be spouse, this may be nominated to someone else, such as your parents, siblings or someone from a previous relationship. You can normally update this nomination easily and at no cost by writing to the provider or to the HR department of the employer. Some provide a form to do this.

3. Review your life & protection cover

With the marriage complete, the married couple have a new found responsibility to one another, both emotional and financial. Protecting your spouse in the event of your death may become important, especially if you are going through other life changes, such as children, mortgages and other progressions.

It would be prudent to review your life covers and other protection arrangements, such as ill health protection to ensure that you are both comfortable that each of you will be protected if something unfortunate was to happen to either of you.

If you have cover from your employer, such as death in service benefit, you may want to contact your HR department to update their records and record your new marital status.

4. Make a will

A cornerstone of any financial planning is having a will in place. Wills become void on marriage and therefore you should address this as soon as possible after the marriage or, you can have a will prepared in contemplation of marriage. A will could also protect children and mitigate the effects of inheritance tax.

Speak to your legal adviser/solicitor about this to ensure that your spouse/family is protected.

5. Take financial planning advice

Once the honeymoon is over and you start to settle into your stride of married life, think about your long term futures together and what you want to achieve both now and at the life cycles that you may encounter, (as examples) from merging two households into one, children, employment changes, wealth management and retirement. You may well have already discussed together what you hope for, however, it is well worth while getting good quality financial advice about how this can be achieved financially.

As a married couple, it may also be prudent to look at your individual income tax positions and how this can be used effectively to reduce any liability to income tax in future tax years.

Speak to an independent financial adviser (IFA) about your mutual objectives and what can be achieved, based on your individual circumstances.

Summary

If you are or a member of your family is getting married, then I wish you every success for the big day and the future.

There is a lot involved in wedding planning and, as noted, financial planning may come as a low priority when looking at what needs to be prepared, but has significant consequences if you get it incorrect. We would be pleased to expand further on the points in this blog when you enquire and please note that this is not an exhaustive list.

We are all different and the needs of a marrying couple will vary, dependent on their individual situations before the marriage and their futures together. Therefore, this article should not be seen or used as individual advice.

Seek Independent Financial Advice (IFA) for your circumstances. Churchouse Financial Planning Limited can be contacted in Guildford, Surrey on (01483) 578800.

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.

A new tax year….2011/2012

Many of you will know that today (06^th April 2011) is the start of a new tax year for individuals and this brings with it the renewal of many tax allowances. Happy New Year to you all!

In most tax years there is sometimes a scramble at the end of the tax year to ensure that as many tax allowances are used where available, and, most importantly, where affordable. Some clients prefer to use these allowances at the beginning of the tax year, rather than waiting until the end, to try and enjoy the full tax year of benefit which starts on the 06^th of April.

I have taken this opportunity of listing some of the allowances that you may want to consider in the coming time as we approach Easter and, of course, the Royal Wedding towards the end of April 2011.

• Increase in ISA investment allowances 2011/2012

The ISA allowance for this new tax year (2011/2012) is £10,680 in total. This amount can be fully invested in equity type investments (such as stocks/OEICs/Unit Trusts), or, if you prefer, you can put up to £5,340 in deposit/ cash holdings, still leaving a balance of £5,340 available to go into investments.

This is usually an annually renewable allowance and you can use your new ISA allowance each year with different providers if you prefer. (ISA rule restriction of one provider of each option per annum). It is now proposed that the annual ISA allowance will now increase each year in line with the Retail Prices Index (RPI).

As noted in a previous blog, a new Junior ISA of £3,000 has been proposed (initially for those without a Child Trust Fund) is in consultation. This may be available from November 2011.

• Capital Gains Tax allowance (CGT)

This is an allowance which allows a tax free gain to be made in a tax year from the sale or transfer of an asset, such as shares or unit trusts, up to a limit in the new tax year of £10,600. Some assets, such as your main residence and your personal car are exempt from this tax.

Many clients, especially higher rate tax payers, find this allowance valuable. If a gain is made above the exemption amount, the gain is then taxed at a flat rate of 28%.

• Annual Gift allowance

To save some inheritance tax (IHT), many clients like to use their annual gift allowance of £3,000. If they did not use last year’s allowance, they can go back one year and use this allowance, making a total gift of £6,000. With the Royal Wedding nearly upon us, it should also be noted that a gift on marriage by a parent to a child of up to £5,000 is also exempt.

The nil rate inheritance tax band of £325,000 currently remains the same in the new tax year 2011/2012. Thereafter, an estate is taxed at 40%. Married couples can combine their allowances together to a total level of £650,000, having taken into account any potentially exempt transfers (PETs) in the past or gifts to others on death.

• Changes in pension contribution rules

In this new tax year (2011/2012) there are many changes in pension legislation and part of these changes have been noted to you in previous newsletters. One example is the change in the level of pension contribution that can be made to a new level of £50,000 gross in the tax year.

There is also a new three year carry forward facility being introduced and if you would like to review your pension contribution planning then please let me know and we can undertake a review based on your circumstances accordingly.

Summary

As you would expect, this is not an exhaustive list of the changes in the new tax year. Because we are all different, any individual needs for saving (both for yourself and for children/grandchildren), retirement, investment or pension planning, as examples, will vary, dependent on your individual requirements. Therefore, this article should not be seen or used as individual advice.

This article contains links to websites of which the content has not been approved by Churchouse Financial Planning.

Seek Independent Financial Advice (IFA) for your circumstances.

Keith Churchouse, Chartered Financial Planner
Director of Churchouse Financial Planning Limited

ISO22222 Certified Financial Planner

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

CHURCHOUSE is a Trademark of Churchouse Financial Planning Limited

Proposed new Junior ISA account/ November 2011

A consultation paper has now been issued to confirm the plans for the new tax efficient Junior ISA account, which is proposed to start from 01 November 2011 and will allow an overall annual contribution limit of £3,000 (proposed not for those without a Child Trust fund/CTF). Full draft regulations can be found at the HMRC website here: http://www.hmrc.gov.uk/budget-updates/march2011/junior-isa-regs.pdf

In part, the proposals for this style of new account is a replacement for the Child Trust Funds (CTFs) and their payments which were allowed for children born between 01 September 2002 and 02 January 2011. After that time, all government contributions to CTFs ceased. Also, any payments that would have been made to disabled and severely disabled children will be channelled to other kinds of support.

The value of the proposed new Junior ISA plan will be locked in for the beneficiary until they reach the age of 18 and then the account will become an adult ISA thereafter. It is anticipated that many of the current providers who offer adult ISA arrangements will expand their range to offer the new Junior ISA option. As with the current standard ISA regime, investment will be able to be made into a stocks and shares arrangement or into a cash /deposit type plan. It is planned that these new ISA limits will be confirmed once the consultation in May 2011 is complete.

Many parents and grandparents may find this of interest for future family savings. We are all different and the needs for saving (both for yourself and for children/grandchildren), retirement, investment or pension planning, as examples, will vary, dependent on your individual requirements. Therefore, this article should not be seen or used as individual advice.

This article contains links to websites of which the content has not been approved by Churchouse Financial Planning.

Seek Independent Financial Advice (IFA) for your circumstances.

Keith Churchouse, Chartered Financial Planner
Director of Churchouse Financial Planning Limited

ISO22222 Certified Financial Planner

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

CHURCHOUSE is a Trademark of Churchouse Financial Planning Limited.