Will being ill affect your income?

Unless you own your own business and have lots of people earning money for you on a long term basis, the answer is probably “Yes”.  But even then, will your staff members stay with you or continue to give their all if you’re not at the helm to give them guidance?

For the rest of us, an Income Protection Plan (IPP) could be the answer to the question, “Who will pay me if I am unable to work through sickness or disablement”?

There are many issues but let’s just highlight two.

Firstly, Some policies have a minimum deferred period, which is usually in line with the government’s definition of ‘long-term illness’ of four weeks.  While that’s financially manageable for some people, it is simply not realistic for everyone.

So that raises the question, if your had to wait four weeks with only limited funds before you can start claiming your income protection cover, will you still be able to meet all your pre-existing financial commitments?

If not, it’s worth considering a policy which has cover much sooner, or even from day one.

Alternatively, if you have a rainy-day fund to hand, you might prefer to extend your deferred period in order to reduce the monthly premium.

Secondly, another point is that traditionally, income protection has been sold on a long-term basis, which allows claims to be paid right up until the client’s retirement age.

But insurers are increasingly offering limited claim periods of one, two or five years, which can dramatically reduce premium costs.

While limited claim periods provide less comprehensive cover, you can still have multiple claims for different illnesses or injuries.

The importance of claim periods lies in giving you more choice and flexibility when it comes to choosing between income protection policies.

Not all clients would require, warrant or need a limited claim period, but it’s worth keeping your options open where the situation applies as there are potentially great savings to be made.

If you would like to explore this subject further, why not contact us for a chat?  There are a myriad of nuances to consider.

Indebted millenials ‘ideal candidates for financial advice’

Debt-ridden millenials are the ideal candidates for financial advice, according to a a leading financial software provider expert.

A spokesman recently insisted young people with loans must seek financial advice now, and not wait once they have finally accumulated wealth.

He said: “Although most young people have not accumulated wealth just yet, many have very complicated financial pictures due to the amount of debt they may be carrying, whether it stems from student loans, credit cards, or car loans.

“Before they can accumulate wealth, they need to know how they should spend their money. This makes them perfect candidates for financial advice.

“An adviser who provides planning-led advice can first educate them and then help them get on the right track to meeting short and long-term financial goals.

“Younger clients can focus on simpler goals like creating a budget or maintaining an emergency fund, while working with their adviser on strategies to maximise their ability to save.

“Most importantly though, the earlier you start good savings habits, the more time you have to build a nest egg that can help you fund your future financial goals.”

He said having an accurate understanding of how markets have performed in the past combined with an understanding of one’s own time frame for retirement might encourage young people to take on more risk in their portfolios.

He added: “The guidance of an adviser may provide some piece of mind as well.  It is always easier to make financial decisions when you realise you are not alone and working with an adviser who has your best interests in mind.”

At ABFM we are building up a reasonable sized client bank of younger people who seem to appreciate the good honest approach we take when talking to them.  It is my belief that Pension Freedoms has made a huge difference to the attitude of all investors no matter their age.  A huge difference from 10 and 20 years ago.

Why not give us a call and have a chat with an Adviser.


Five reasons why self-employed people should take advantage of the power of their pension…

The picture-perfect view of being self-employed is understandably attractive: the notion of being your own boss and doing what you love under your own steam.

In fact, the number of self-employed workers in the UK has steadily risen from 3.3 million in 2001 to 4.8 million in 2017, according to latest figures.

However, recent statistics also show that most self-employed people have little confidence in their pensions and almost half (45%) of self-employed workers aged between 35 and 54 have no private pension at all.

The reality is that your pension is one of the most powerful saving tools available and has many advantages that other saving methods don’t. Therefore, those who are self-employed and not using a private pension could be missing out on a lot of benefits in later life.

To help the self-employed, a pension advice specialist has outlined five reasons why they should take advantage of the power of their pension.

  1. Compound interest

Understanding what compound interest is and how it can benefit you will help you stay ahead of your peers when it comes to your savings. Put simply, when you save money it should earn interest. This interest can then earn more interest.

The average investment growth (interest) you get in a pension tends to give your savings more opportunity to grow than other tools, such as a standard savings account or a cash ISA. This boosts the growth you can enjoy from compound interest.

  1. Tax relief

Tax relief is one of the greatest USPs of a pension as it immediately increases the value of your contributions, which is then multiplied year after year by compound interest.

For basic-rate taxpayers, when you contribute to your pension the government adds back the 20% that is usually deducted from your earnings. This means that if you add £80 to your pension the government will top this up to £100. Higher and additional rate taxpayers can also claim back the extra 20% or 25% they pay in income tax.

  1. Take back control

Being self-employed means you’re in control of many things that your peers maybe aren’t. Saving into a pension can help extend that control to later in life, by giving you more money and income options to choose from than relying on your business or assets like property.

  1. Don’t rely on your state pension

Self-employment might mean that you don’t qualify for a full state pension as you pay a different level of National Insurance to those who are employed.

Fully utilising a private pension and the power it gives you will mean you could be in a position where you can be sure that you won’t have to rely on the state pension in the future.

  1. History shows us that stock markets work

There’s a good chance that a proportion of your pension is invested in the stock market. And when it comes to stock markets, news headlines are often full of sensationalist doom and gloom. This can understandably cause worry and fuel people’s distrust of pensions.

It’s really important to understand that going up and down all the time is what stock markets do and history shows us that, as a whole, they have always tended to rise over the longer term. The best thing to do is pay as little attention as possible to short-term news headlines and trust decades worth of reality.

I’ve been a sole trader and it can be tough. Well-meaning friends talking about how they wished they had the freedom of being their own boss and ignoring the huge uncertainty that can come with being self-employed. When’s the next job coming in? Will clients pay on time? Will I have enough to get by in the future?

Pensions are extremely powerful and if yours is properly managed you can look to your financial future with much more certainty. And it could mean even more flexibility and freedom when it comes to the choices you have in life.

It just doesn’t make sense to ignore or neglect your pension, especially if you are self-employed. And when it’s so easy to find out how your pension is doing and how to get it working as hard as it can for you.”


Bank of Mum and Dad may be running out of money

The “Bank of Mum and Dad” may be running out of money as parents are now providing smaller sums, according to research by Legal & General.

Forecasts from L&G and the Centre for Economics and Business Research found the average contribution from parents towards a child’s mortgage deposit will decline from £21,600 in 2017 to £18,000 in 2018.

L&G’s data found 316,600 property transactions in 2018 would rely on at least some help from parents, up from 298,300 in 2017.

This means parents will give their offspring a total leg-up of £5.7bn in 2018 – less than the £6.5bn they gave in 2017 but still an overall increase on the £5bn in 2016.

Despite the fall predicted in 2018, the “Bank of Mum and Dad” will remain a big factor in the UK housing market, with 27 per cent of buyers forecast to receive help from friends or family.

A spokesman for L&G, said: “The Bank of Mum and Dad remains a prime mover in the UK housing market, and will lend the best part of £6bn to buyers this year, with over 315,000 transactions being underpinned by parental help.

“However, it’s clear that households are feeling the pinch, as contributions have reduced by an average of 17 per cent from nearly £22,000 to a still very generous £18,000.

“The fact that in 2018, one in four housing transactions in the UK will be dependent on the Bank of Mum and Dad, while hard-pressed parents are finding it more difficult to provide the funds to help their family with deposits, will further exacerbate the UK’s housing crisis.”