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.

SME’s and all things marketing

In my opinion, marketing is one of the vital components of your business strategy, especially if you are a small to medium size enterprise (SME). Never be embarrassed about the scope and scale of your marketing. Remember that in a new business, no one else is going to do it for you! This is also the case when you enter a partnership with business colleagues.

As we move into an autumn of possible austerity measures being implemented by our coalition Government and the potential of redundancy looming over some employees, planning your strategy for a new start up business is going to be important in the balance of 2010 and into 2011.

Someone within the new business specifically has to own the marketing project and be enthusiastic to promote the ethos of the business. Never assume that someone else is dealing with marketing: get it agreed at the outset who is leading the role and get them (or you) to put together the marketing plan for the next three years. Create a specific 12-month plan as well. I suggest limiting the length of the second plan to 12 months at the outset because your marketing will need to be agile in its approach, taking advantage of opportunities as and when they arrive. Using financial planning and independent financial advice as examples, there could be a change in legislation or an upturn in a particular investment market.

What’s the difference between economies of scale and economies of scope, and why is this important to your marketing strategy?

This was an important learning point for me, especially with regard to marketing. When applying economies of scale to marketing you are sending out a single message in bulk, such as a newsletter. This does work. Because of the volume being used, production of your marketing can be cheap and timely.

But what about taking the same message and rearranging it to re-use parts of your message elsewhere to amplify your message? This is an economy of scope. The same newsletter you wrote to take advantage of economies of scale may feature various newsworthy topics in your profession. You will have spent time checking these topics to ensure that they are relevant, compliant and above all, interesting.

Example of an Economy of Scope

* Create a ‘blogspot’ on your website and segment the topics from your existing newsletter. Then turn them into blogs on your website. You will know that Internet listing sites crave new content.
* Record a five-minute discussion about an interesting and topical subject with a colleague, friend or family member. Then podcast this on your website, or if you are more sophisticated, video it and ‘vodcast’ it. Watch your Internet rankings soar.
* Use social networking sites to discuss the same issue, such as Twitter. However, make sure that it is both relevant and compliant for your regulatory authority, if you have one. (my name on Twitter is ‘onlinefinancial’)
* Convert your regular newsletter into an article, and write to the press about the issues you are considering. Choose an issue that you are well qualified to talk about and are able to answer questions about. This may also have the advantage of demonstrating your commitment to the FSA’s Treating Customers Fairly (TCF) initiative which we endorse.

By doing this, you have taken one newsletter and reinvented it in four other formats, giving the same informed message in very different distribution styles, increasing the potential for audience variation and penetration. With a little extra application, it is possible to diversify your message and distribute it into other areas, creating greater scope for your message to be heard by new prospects.

Once you are recognised as an expert in the topic selected, update your thoughts and understanding and repeat the process.

As an example, many television channels have used the same philosophy, broadcasting their standard channel, then a ‘plus 1’ model, as a new separate channel, just one hour forward. They then add a website distributing the same information. This creates three distribution models for the same message. It’s both innovative and cost effective.

Marketing techniques have changed significantly in recent years and I have found that subtlety over ‘in your face’ promotion works best. Many financial services organisations (other than the banks) lack a shop window and many would not want one. When you have got your marketing right, these prospects will find you easily and sales, either fee based or commission driven will be achieved.

Also, the timing of your marketing is vital. Referring back to your year’s sales target, you have correctly divided your sales target up into months to ensure that you maximise peak performance. Your marketing campaign must coordinate with this sales strategy. If you were running a Christmas shop, you probably would not start your company’s peak marketing campaign in July. The same applies to financial services. You might build your campaign up to March/April/May and then regenerate it again to October/November.

We wish you every success with your new business venture.

Extracts from the new book, Sign Here, Here and Here!…Journey of a Financial Adviser ISBN: 978-0-9564325-0-6

Further details on this topic can be found in the new book available at our website, www.signherehereandhere.co.uk or on Amazon here.

Speak to Churchouse Financial Planning Limited (or your independent financial adviser/ IFA). This statement is not individual advice and should not be relied on because each clients circumstances are different.

Keith Churchouse

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

When to transfer money or assets on divorce?

A capital payment to a spouse may have been agreed in your financial settlement and this will need to be paid at the specified time after the divorce is finalised. This may have been detailed in your Consent Order. This may involve releasing funds from deposit accounts or selling/transferring shares and other assets in order to meet the payment.

It is important that you don’t forget to take a look at the tax implications of this payment requirement as it can have a significant effect on the value that you (or your ex-spouse) finally achieve. For example, you may be required to transfer shares to your ex-spouse upon divorce. Transfers of assets between current spouses do not normally create tax charges — but a transfer to or from a person who is no longer your spouse because you are now divorced may do.

In normal circumstances, assets transferred between civil partners or spouses in the tax year during which they have lived together, including the year of separation, are exempt from Capital Gains Tax (CGT). However, from the end of the tax year of separation the situation changes and if you have large financial assets to be redistributed then you may want to take this into account. You should seek advice on this subject if it affects you, you don’t want to get this wrong, I am sure!

Careful financial planning and timing are important here. Tax positions and legislation can change regularly and the comments above may already have become out of date by the time you might go through a divorce of your own. Check with your accountant or financial adviser before making any changes to make sure that the legislation has not changed.

The tax year runs from the 06th April each year to the 05th April the following year, with most individual annual tax allowances being renewed each year. Each individual is taxed separately, so ensure that you take this into account with your negotiations. Your accountant or independent financial adviser (IFA) should be well placed to make sure you minimise the effects of tax.

Further details of this new book are available at our websites, www.addictedtoweddingcake.co.uk or on Amazon here.

Speak to Churchouse Financial Planning Limited (or your independent financial adviser/ IFA) to help with advice on this issue. This statement is not individual advice and should not be relied on because each clients circumstances are different.

Keith Churchouse

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

All things pensions in divorce

Pensions can be a complicated subject at the best of times. You probably know that already! When it comes to pensions in divorce, then the situation can get very complicated. Getting good advice at the outset from an individual who is qualified in the subject is usually worthwhile, as you will see.

It may be possible in your case that a pension share may be involved. This may involve both parties getting some property equity, but this equity is effectively traded for a part share of a pension value. If agreement is reached, then a pension share order (or Pension Annex) will be granted by the court and the percentage of the pension that is to be split away is usually transferred out to another pension arrangement of the recipient’s choice, dependent on the scheme. Also note that any agreed transfer out of a pension may incur administration fees by the original provider concerned and I have considered the issue of pensions and their benefits in detail in my book, Addicted to Wedding Cake, The Journey of Divorce.

There was another alternative for pension benefit division introduced in 1995 Pensions Act called Earmarking. This has not been widely used because it may not achieve a ‘clean break’ in pension terms and does not allow the ex-spouse to receive a pension income until the originating spouse with the pension fund actually draws benefits and retires. Death and remarriage will also effect this option. Some pension providers, usually final salary schemes, allow the share to stay within the scheme, although this is not always the case. If this is achievable then it should be considered carefully along with any other options. Remember that some pensions can give benefits in different ways and you may come across Personal Pensions (PPP), Section 32’s, Retirement Annuities (RA’s), Guaranteed Annuities and Executive Pension Plans. Quite a maze and don’t forget your State Pension Benefits. You should speak to a qualified Independent Financial Adviser (IFA) about the options available, but I recommend that you search hard for an adviser who knows the subject well as it is a specialist area.

Whatever you do, get independent financial advice on the real monetary values of what you and your partner hold in pensions, as an example. This is partly because you do not want to give away too much by transferring a Cash Equivalent Transfer Value (or CETV for short) to an ex-spouse.

The independent financial adviser (IFA) can be instructed by you individually or, with agreement, both parties to get an overall view of the financial situation to demonstrate true values of pensions and there benefits. Some IFAs are affiliated and accredited by the organisation Resolution and it might be worth your while enquiring about this accreditation from your financial adviser as their numbers have been growing across the UK. They have received training and testing as a ‘Financial Neutral’ in helping a separating couple with the pensions and financial affairs in divorce situations.

Further details of this new book are available at our websites, www.addictedtoweddingcake.co.uk or on Amazon here.

Speak to Churchouse Financial Planning Limited (or your independent financial adviser/ IFA) to help with advice on this issue. This statement is not individual advice and should not be relied on because each clients circumstances are different.

Keith Churchouse

Director of Churchouse Financial Planning Limited

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