Redundancy

Presentation by … Redundancy Planning

Your Concerns Money Management & Budgeting: - Mortgages - Loans & Debts - Pension – Protection Taxation, Inheritance Tax & Will Planning Investments & Savings The Way Forward Agenda

One of the UK’s foremost financial commentators

Income? Growth? Family Protection? Taxation? Advice? Investments? Inflation? Pension Shortfall? Long Term Care? Quality of life? Costs? Inheritance Tax? Your Concerns

Money Management – Our Belief The most effective management of resources should include benefits, savings and capital until new employment is found Our experience shows that by reviewing your personal financial situation most people can continue to meet day-to-day living expenses

Question: How to cope with these outgoings? What course of action? Mortgage Approximately £250 per month Loan / Credit Card Approximately £80 per month Savings (Bank) Approximately £150 per month Savings (Endowment) Approximately £50 per month

Review all your regular outgoings Review mortgage Consider repaying loans / credit cards Re-appraise your regular savings accounts and policies Your Guide to your outgoings

Job seeker allowance may be available 6 – 12 Months Mortgage Payments 6 – 12 Months Living Expenses Could be funded from redundancy capital until new employment or replacement income is sourced 0 – 6 Months Plan

Review & Restructure: Debts Mortgage Commitments Remember redundancy payment is compensation for : Lost Benefits Lost Pension Lost Capital Remember it is your job that is redundant not you!! Other Considerations

Reduce / Pay Off? Consider Life Policies? Reduce your outgoings? Comfort factor Retain? Access to capital Investment Potential Re-negotiate Low interest rates Your Mortgage Guide

Fixed and Capped Rates Flexible/Offset Mortgages Tracker Rates Discounted Rates Your home may be repossessed if you do not keep up repayments on your mortgage The Mortgage ‘Minefield’

Loans tend to be shorter term 3 – 5 years Credit cards can be expensive Check high APR Check surrender/penalties on loan Your Guide to Loans and Debts

Savings to Bank – could be stopped Mortgage Endowment – It may be best to see it through to maturity “ To find out more about any of these issues, please tick the coloured priority form” Your Guide to Savings

Lump sum payment – currently tax free? AVC’s / FSAVC’s? Early Retirement? Voluntary? Ill health? Death in service? Death in retirement? Preserved pension? Dependant’s pension? Children’s pension? Pension Issues – Your Pension Checklist

Severance payments over £30,000 Amounts over £30,000 = taxable income Buy extra pension? Or Pay tax and keep capital? Pension Issues – Your Pension Checklist

If you have AVC’s/FSAVC’s Open Market Option (OMO) Seek Advice Crystallisation if over 55 years old Pension Issues

Options if under 55 years old Leave it where it is – as a preserved pension Transfer to new employer Transfer to Personal Pension Plan/Stakeholder Pension/”Section 32” Buy-Out Policy Seek advice Pension Issues

Future pension arrangements: Join new employer’s scheme Take out Personal Pension Plan Take out Stakeholder Pension Alternative savings plans Pension Issues – Other Points to consider

How to provide for: lost benefits death in service life assurance pension Redundancy / Early Retirement Pension Issues

Open to everyone even if they do not work Can invest £3,600 p.a. gross per tax year without evidence of earnings Tax Relief on Contributions (at highest marginal rate of income tax) up to “Annual Allowance” (£255,000 for 2011/12, £50,000 for 2012/13 ) Personal / Stakeholder pensions Pension Issues

Pension Commencement Lump Sum of up to 25% of Pension Fund Anytime between 55 years of age and 75 A Lifetime Annuity must be taken by age 75 or go into Alternatively Secured Pension (ASP) Choice of Providers Personal / Stakeholder pensions continued… Pension Issues

Family Income Benefit Term Assurance Pension Term Assurance (no tax relief on premiums now) Whole of Life Endowment Protection

Permanent Health Insurance Critical Illness Protection

£14.80 £17.50 £8.50 £10.50 £6.00 £7.30 £5.35 £6.67 Female aged 20 Male aged 30 Female aged 30 Male aged 40 Female aged 40 Male aged 50 Female aged 50 Male aged 20 Life Protection only Sum assured £100,000 – Level term benefit/level premium/ guaranteed rates. Quote based on non-smoker; cover to age 60 Protection Source: Assureweb April 2010

£38.40 Female aged 20 £29.50 Male aged 30 £29.60 Female aged 30 £46.60 Male aged 40 £44.60 Female aged 40 £82.20 Male aged 50 £75.50 £36.00 Female aged 50 Male aged 20 Sum assured £100,000 – Level term benefit/level premium/ guaranteed rates. Quote based on non-smoker own occupation; cover to age 60 Critical Illness only Protection Source: Assureweb April 2010

Sum assured £100,000 – Level term benefit/level premium/ guaranteed rates. Quote based on non-smoker own occupation; cover to age 60 Source: Assureweb April 2010 Life Protection / Critical Illness combined £17.89 Female aged 20 £28.88 Male aged 30 £28.98 Female aged 30 £45.64 Male aged 40 £43.77 Female aged 40 £80.06 Male aged 50 £73.97 £20.12 Female aged 50 Male aged 20 Protection

“ I believe we should all pay our taxes with a smile – I tried, but they wanted cash!” - Anon Your Guide to Taxation

Personal Allowances based on tax year 2010/11 Your Guide to Taxation *From the 2010-11 tax year the Personal Allowance reduces where the income is above £100, 000 – by £1 for every £2 of income above the £100,000 limit. This reduction applies irrespective of age. Under 65 £7,475 65-74 £9,490 75 £10,090

Tax on Capital Assets on Death Inheritance Tax

Tax on capital assets on death First £325,000 of estate - 0% tax Balance of estate - 40% tax Inheritance Tax - based on tax year 10/11

Your Guide to Estate Planning What are you taxed on? 40% Is it a voluntary tax? What is the current rate of tax? What is the Nil Rate Band? Worldwide Assets £325,000 Some would say YES! Levels and bases of, and reliefs from taxation are subject to change

Worldwide assets House Savings Investments Cars Caravans Holiday homes (UK and Abroad) House contents Capital value of life interest trusts Some pension funds What is Inheritance Tax payable on? Inheritance Tax - based on tax year 11/12

Gifts to spouse Main Exemptions First £3,000 each year – annual exemption “ Normal expenditure” Potentially Exempt Transfers (PETs) Inheritance Tax - based on tax year 11/12

Other exemptions Levels and bases of, and reliefs from taxation are subject to change On consideration of marriage Child (for each parent) £5,000 Grandchild £2,500 Other £1,000 Small gifts £250 Charities Unlimited Political parties Unlimited Inheritance Tax - based on tax year 10/11

All gifts other than exemptions and chargeable lifetime transfers are known as PETs After 7 years asset does not form part of estate Possible Tax relief on a sliding scale (rules apply however) Early Planning! Potentially Exempt Transfers

Making a gift but still retaining an interest in it. Inland Revenue will treat the asset as still belonging to you. Gifts with reservation

Gifts from excess income could be used in the same way as annual allowances But watch out where income comes from* * Surplus income should be shown to be able to come from normal income-producing assets such as pensions, deposit-based accounts, annuities and certain other types of investments. Gifts out of income

Do Nothing Spend It/Give it away! Make lifetime gifts Plan to mitigate it What can you do?

On death Mr Smith passes all of his estate (plus jointly owned assets) to his wife free from IHT. However, this wastes 100% of his Nil Rate Band. Nil Rate Band £325,000 (this amount has been frozen until 2015) Mrs Smith total Sole Estate = £650,000 Mr & Mrs Smith’s total joint Estate £650,000. A transferable Nil Rate Band now arises when one party to a marriage/civil partnership dies and the amount of their estate chargeable to IHT does not use up all of the Nil Rate Band. Where this happens, the unused part can now be transferred to the surviving spouse/civil partner when they die. Assuming Mrs Smith dies after 9 October 2007, her executors may also utilise the late Mr Smith’s Nil Rate Band which he wasted by leaving everything to his widow. Less 2 x Nil Rate Bands = £650,000 Taxable Estate = £0 Alleviation for Middle England

Mr Smith’s Estate £325,000 Mrs Smith’s Estate £325,000 Mr Smith leaves the £325,000 in a Discretionary Will Trust. Total Estate = £325,000 TAX DUE @ 40% NIL Taxable Estate = Nil Nil Rate Band £325,000 (As of April 2010) Levels and bases of, and reliefs from taxation are subject to change. If the potential growth in value of an asset is likely to outstrip future increases in the Nil Rate Band, tax planned Wills on first death leaving an amount up to £325,000 [2010/11] to a trust should still be considered. Inheritance Tax Solution TAX DUE @ 40% = NIL Year 2010 value of trust - £390,000 (available NRB - £325,000 had asset passed to surviving spouse on first death.)

Levels and bases of, and reliefs from taxation are subject to change IHT savings may still be made via tax planned wills in the medium/long term even where the combined estate is <=£650,000. Couples with existing Pre-Budget wills should revisit them. A simple codicil may suffice for required changes. The ideal solution may be to always use a first death discretionary nil rate band trust and let the trustees decide the right action to take when death occurs. Outcome

Your Guide to Wills and Estate Planning

Specialist financial advice needed to ensure your estate is equalised so that each can use nil rate bands. Possibly need to review life assurance and place in trust Need to look at death in service benefits and rules in connection with their payment Need to look at the value of your home and ensure that it is split 50/50. This may require severance of tenancy options Why would I need a Financial Adviser?

To ensure your wishes are carried out after your death To ensure the right people get the right assets To speed up the transfer of assets (via Probate) To reduce Inheritance Tax through Will Trusts Why make a Will?

Laws of Intestacy – the State determines who gets your estate Loss of absolute control over your assets Unmarried partners may suffer financially Long delays in transferring £250,000 to spouse plus a life interest in 50% of residue The remaining 50% interest for children (in trust under 18) What happens without a Will?

Review it regularly Marriage will annul a Will Divorce will affect a Will Have you appointed Guardians? Do you have stepchildren? Is your Will tax-efficient? Existing Will

Lasting Powers of Attorney Trustees must take financial advice Where to keep your Will Other Legal Matters

Long term care may use up your assets Use a Will Trust to protect your house Severing your house tenancy Take action early .……..Complex rules – specialist advice essential “ To find out more about any of these issues, please tick the coloured priority form” Long Term Care – Protecting your assets

Is Inflation still a threat? Inflation rates displayed are for illustration purposes only and should not be viewed as proposed past or future inflation values. Figures are based on the value of £1,000 189 358 544 20 434 599 738 10 659 774 858 5 920 950 970 1 8% 5% 3% Annual Rate of Inflation Years Ahead

Guide to ‘Goods and Services’ Source: Office for National Statistics - ‘Focus on CPI February 2010’ Prices: 1980 vs Today * Average beer prices not recorded prior to this date Average Price 1980’s Average Price Feb 10 Increase Source Pint of Lager 83p £2.89 248% ONS 1987* Pint of Milk 17p 44p 159% ONS Litre of Petrol 38.46p £1.12 191% ONS Loaf of Bread 30p £1.21 303% ONS

Guide to Commodity Prices Source: Office of National Statistics website April 10 RPI July 1985 March 2010 Increase 95.23 217.09 128%

Security Income: now or later? Capital growth Tax efficiency Access to capital Rate of return What are your aims and objectives?

Interest Earning Investments Where are the best accounts? Fixed-Interest Securities What are Gilts & Corporate Bonds? Asset Backed Investments What choices are there? Your Guide to Investment

Bank and Building Society Accounts Internet National Savings Interest earning investments

Gilts Government Stock Corporate Bonds IOUs issued by companies Fixed interest investments

Low/medium risk sector - With Profit, Property* Distribution Bonds* Medium risk investors - Managed Funds* Adventurous investors - a variety of specific funds * Property funds may refuse to switch or encash investments for up to twelve months, as property in the fund may not always be readily saleable. The value of property is a matter of valuer’s opinion rather than fact. Suitable for a wide range of investors Investments Bonds

Long-term growth prospects Potential to beat inflation Disadvantages/risk Spread your risk Stock Market Activity Help to spread the risk Unit Trusts / OEICs/ ISAs

Broad exposure Basket of investment Professional management Income or growth Geographic diversification Help to spread the risk Unit Trusts / OEICs/ ISAs -

Bates Scale – Investment Risk High Low

Annual allowance for tax year 2011/12 is £10,680 Two types of ISA - ‘Cash’ or ‘Stocks & Shares’ Can invest total allowance in Stocks & Shares ISA Can split the annual allowance across the 2 ISA types but maximum allowance of £5,340 in Cash ISA per year Could choose to invest less than £5,340 in a Cash ISA and place more in a Stocks & Shares ISA e.g. £2,000 Cash and £8,680 in Stocks & Shares ISA, provided annual allowance not exceeded. ISA Year Subscription

£5,000 invested for 10 years – Invesco Perpetual Income, with NET income re-invested Past performance will not necessarily be repeated in the future. Capital held in a deposit account is guaranteed not to fall in value, whereas the value of units and income from an equity- based investment can fall as well as rise and is not guaranteed. Equity based investments should be considered as medium to long term investments, therefore if you withdraw in the early years you may not get back your original investment. Your Guide to Investment

Security for your capital Income at a level which maintains your standard of living Capital Growth because inflation is still a threat Flexibility to meet changing circumstances Obtain Independent Advice Summary

Complete and hand in the Priority Coupon Book a one-to-one consultation Contact marketingservices@batesadvice.com Call us on 0845 013 5600 We wish you good luck!! What do you do now? The way forward…

Honister Partners 62 Anchorange Road Sutton Coldfield West Midlands B74 2PG Telephone: 0845 013 5600 Facsimile: 0121 362 1010 Website: www.honisterpartners.com Honister Partners Ltd is an appointed representative of Sage Financial Services Ltd. The Financial Services Authority does not regulate taxation advice or will writing. Past performance is not a guide to future performance. The information given is based on our current understanding of Law and Inland Revenue practice. Tax rates and reliefs may change and their value depends on the individual circumstances of the investor. The information provided in this presentation has been provided as information only and does not represent individual advice. It is unrealistic to assume that markets/funds or indexes will perform as they have done in the past. Honister Partners offer advice based on the whole of the market.

Redundancy

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