Professional Documents
Culture Documents
Wealth
Management
A Guide to
Wealth Management
Welcome to our ‘A Guide to Wealth Management’. We
understand that no two people share the same financial
situation or goals. The bespoke advisory service we
provide reflects our individual clients objectives, aimed at
maximising and safeguarding their wealth.
We appreciate that making sense of your planning objectives and finances requires
even more time and effort in today’s constantly fluctuating economic environment.
The all-round and ongoing approach to wealth management we offer will help you
plan and achieve your financial and lifestyle objectives, in the most tax-efficient way,
within your desired timescale and with the appropriate amount of acceptable risk.
10 27
23 14
09
06
7
Income distribution bonds. 10
Investment bonds. 10
Investing for income. 11
Spreading risk during economic uncertainty. 12
Offshore investments. 13
FINANCIAL INDEPENDENCE
Financial independence. 14
Pensions. 14
Self-Invested Personal Pensions. 16
Generating an income for retirement. 17
Transferring pensions. 18
Small Self-Administered Schemes. 18
Locating a lost pension. 19
12
WEALTH PROTECTION
Wealth protection. 20
Inheritance tax planning. 20
Protecting you and your estate. 21
Long-term care. 22
UK Trusts, passing assets to beneficiaries. 23
Business strategy
Business strategy. 25
Protecting your business. 25
Corporate pension planning. 26
Employee benefits packages. 27
Creating wealth
We provide solutions for the diverse needs of both our wealthy clients and those who aspire to
become wealthy, enabling each individual to structure their finances as efficiently as possible.
There are many different ways to grow your wealth, from your life priorities, goals and attitude towards risk for
ensuring you receive the best rates for short-term cash return. Any number of changing circumstances could
management, to a more complex undertaking of creating an cause your wealth to diminish, some inevitable and
investment portfolio to grow your wealth for the long-term. some unpredictable - new taxes and legislation, volatile
markets, inflation and changes in your personal life.
We can help you make informed decisions about the Structuring your wealth in a way that minimises the
investment choices that are right for you, by assessing impact of these changes is essential. n
Pooled invetsments
If you require your money to provide the potential for capital growth or income, or a
combination of both, provided you are willing to accept an element of risk pooled investments
could just be the solution you are looking for. A pooled investment allows you to invest in a
large, professionally managed portfolio of assets with many other investors. As a result of
this, the risk is reduced due to the wider spread of investments in the portfolio.
Pooled investments are also manager researches the market the shares in the index. For would achieve. However,
sometimes called ‘collective and buys and sells assets with technical reasons the return active management does not
investments’. The fund the aim of providing a good is rarely identical to the index, guarantee that the fund will
manager will choose a broad return for investors. in particular because charges outperform the market or a
spread of instruments in need to be deducted. tracker fund. n
which to invest, depending Trackers, on the other hand,
on their investment remit. are passively managed, Trackers tend to have
The main asset classes aiming to track the market in lower charges than actively
available to invest in are which they are invested. For managed funds. This is
shares, bonds, gilts, property example, a FTSE100 tracker because a fund manager
and other specialist areas would aim to replicate the running an actively managed
such as hedge funds or movement of the FTSE100 fund is paid to invest so as to
‘guaranteed funds’. (the index of the largest do better than the index (beat NeeD MORE
100 UK companies). They the market) or to generate a INFORMATION?
Most pooled investment funds might do this by buying the steadier return for investors PLEASE CONTACT US
are actively managed. The fund equivalent proportion of all than tracking the index WITH YOUR ENQUIRY.
Unit trusts
Unit trusts are a collective investment that allows you to participate in a wider range of
investments than can normally be achieved on your own with smaller sums of money. Pooling
your money with others also reduces the risk.
The unit trust fund is divided investment decisions. They of equities, bonds, property These are known as actively
into units, each of which invest in stock markets all and cash and are known as managed funds.
represents a tiny share of the round the world and for the balanced funds. If you wish
overall portfolio. Each day more adventurous investor, to marry your profits with However, a sizeable minority of
the portfolio is valued, which there are funds investing in your principles you can also funds simply aim to replicate
determines the value of the individual emerging markets, invest in an ethical fund. a particular index, such as the
units. When the portfolio such as China, or in the so- FTSE all-share index. These
value rises, the price of the called BRIC economies (Brazil, Some funds invest not in are known as passive funds, or
units increases. When the Russia, India and China). shares directly but in a trackers. n
portfolio value goes down, number of other funds. These
the price of the units falls. Alternatively some funds are known as multi-manager
invest in metals and natural funds. Most fund managers NeeD MORE
The unit trust is run by a resources, as well as many use their own judgment INFORMATION?
fund manager, or a team of putting their money into to assemble a portfolio PLEASE CONTACT US
managers, who will make the bonds. Some offer a blend of shares for their funds. WITH YOUR ENQUIRY.
Investment trusts
Investment trusts are based up, whereas unit trusts cannot. net asset value of the trust price is more than the NAV
upon fixed amounts of capital Gearing up can work either to divided by the number of per share. This means that
divided into shares. This the advantage or disadvantage shares in issue. The share investors are buying shares
makes them closed ended, of investment trusts, depending price of an investment trust in the trust at a higher price
unlike the open-ended on whether the stock market is depends on the supply and than the underlying stock
structure of unit trusts. They rising or falling. demand for its shares in market value of the trust’s
can be one of the easiest and the stock market. This can assets. The movement in
most cost-effective ways to Investment trusts can also result in the price being at a discounts and premiums is
invest in the stock market. invest in unquoted or unlisted ‘discount’ or a ‘premium’ to a useful way to indicate the
Once the capital has been companies, which may not be the NAV per share. market’s perception of the
divided into shares, you can trading on the stock exchange potential performance of a
purchase the shares. When an either because they don’t wish A trust’s share price is said particular trust or the market
investment trust sells shares, to or because they don’t meet to be at a discount when the where it invests. Discounts
it is not taxed on any capital the given criteria. This facility, market price of the trust’s and premiums are also one of
gains it has made. By contrast, combined with the ability to shares is less than the NAV the key differences between
private investors are subject to borrow money for investments, per share. This means that investment trusts and unit
capital gains tax when they sell can however make investment investors are able to buy trusts or OEICs.
shares in their own portfolio. trusts more volatile. shares in the investment trust
at less than the underlying
Another major difference The net asset value (NAV) is stock market value of the
between investment trusts and the total market value of all trust’s assets. NeeD MORE
unit trusts is that investment the trust’s investments and INFORMATION?
trusts can borrow money for their assets minus any liabilities. A trust’s shares are said to be PLEASE CONTACT US
investments, known as gearing The NAV per share is the at a premium when the market WITH YOUR ENQUIRY.
ISAs are virtually tax-free remember once you have if you are aged 50 or over income. This is taken as
savings, which means that transferred your cash ISA to n f rom 6 April 2010, the a ‘tax credit’ before you
you do not have to declare a stocks and shares ISA it ISA limit will increase to receive the dividend and
any income from them, and is not possible to transfer it £10,200, up to £5,100 of cannot be refunded for
you can use an ISA to save back into cash. which can be saved in ISA investments
cash or invest in stocks and cash if you are under the n if you’re a higher rate
shares. Money saved in the current age of 50. taxpayer you would
tax year: normally pay tax on
What can you save How much tax will dividend income at
or invest in an ISA? n y ou are able to transfer you save? 32.5 per cent. In an ISA
ISAs can be used to: money saved in the Interest and Dividends from you won’t get back the
current tax year from a savings: 10 per cent dividend tax
n s ave cash in an ISA and cash ISA to a stocks and credit element of this, but
the interest will be tax-free shares ISA, but you must n if you pay tax at the basic you will save by not having
n invest in shares or funds transfer the whole amount rate, outside an ISA you to pay any additional tax
in an ISA – any capital saved in that tax year in would usually pay 20 per
growth will be tax-free and that cash ISA up to the cent tax (2009/10) on your Capital Gains Tax
there is no further tax to day of the transfer savings interest (CGT) savings
pay on any dividends you n the money transferred is n if you pay tax at the higher If you make gains of more
receive then treated as if it had been rate, outside an ISA you than £10,100 from the
invested directly into the would usually pay tax sale of shares and certain
Transferring money stocks and shares ISA in that at 40 per cent on your other assets in the tax year
from cash ISAs to tax year. you are still able to savings interest 2009/10, you would normally
stocks and shares ISAs save or invest the remainder n if you pay the ‘saving rate’ have to pay CGT. However,
If you have money saved of your £7,200 annual ISA of tax for savings, outside you do not have to pay any
from a previous tax year, you investment limit in that tax an ISA you would pay tax CGT on gains from an ISA. n
can transfer some or all of year, including up to £3,600 at 10 per cent on your
the money from a cash ISA in a cash ISA savings interest
to a stocks and shares ISA n from 6 October 2009, the n if you’re a basic rate NeeD MORE
without this affecting your ISA limit will increase to taxpayer inside or outside INFORMATION?
annual ISA investment £10,200, up to £5,100 of an ISA you pay tax at PLEASE CONTACT US
allowance. However, please which can be saved in cash 10 per cent on dividend WITH YOUR ENQUIRY.
Income
distribution
bonds
Distribution bonds are
intended to provide
income with minimal
affects on your original
investment. They
attempt to ensure that
any tax-free returns,
up to 5 per cent and
usually in the form
of dividends, do not
greatly reduce your
original investment,
thereby providing the
opportunity for future
long-term growth.
They also combine two
different asset classes,
equities and bonds,
inside one investment
wrapper.
Investment bonds
Distribution bonds
tend to have a higher
amount invested
in UK equities than
other types of bonds,
so they may be An investment bond is a single premium life insurance policy and is a
riskier. Nevertheless, potentially tax-efficient way of holding a range of investment funds in one
distribution bonds
normally have a place. They can be a good way of allowing you to invest in a mixture of
strong income flow investment funds that are managed by professional investment managers.
to them from reliable
investments to Each bond is usually designed with the value of these assets. not until you cash in your bonds
increase their security. to provide benefits for different Investment bonds are single or make partial withdrawals of
A larger exposure to types of investors but a premium life insurance policies, over 5 per cent per annum of
equities as part of their common element is that they meaning that a small element of your original investment. This
overall investment mix aim to produce long term life insurance is provided. This is is because there is a special
provides the potential capital growth and/or generate paid out after your death. rule which allows you to make
for longer term growth. a long-term return. When you annual withdrawals from your
invest in a bond you will be No capital gains tax is paid bonds of up to 5 per cent for
Depending on the allocated a certain number on the gains that you make, 20 years without any immediate
performance, the of units in the funds of your and you do not pay basic rate tax liability. It is possible to carry
income produced from choice or those set out by the income tax on any income. As these 5 per cent allowances
distribution bonds will conditions of the bond. a higher rate taxpayer you may forward, so if you make no
fluctuate, and for tax become liable to income tax at withdrawals one year, you can
purposes, withdrawals Each fund invests in a range of a rate equal to the difference withdraw 10 per cent of your
can be deferred for up assets and the price of your units between the basic rate and the investment the next, without
to 20 years. n will normally rise and fall in line higher rates (20 per cent), but triggering a tax charge. n
If, during this current important to spread risk low. Conversely there value Some exposure to emerging
recessionary climate, you are by having a good mix of tends to fall when interest economies, whose currencies
seeking higher returns from assets. You need to get rates rise. look likely to appreciate
your investments, you may the right balance within against sterling, is worth
want to consider a combination your portfolio and this will Absolute return funds can considering. There is also an
of the following: corporate also depend upon your protect investors when argument for foreign income
bonds, equity income, absolute individual needs. markets go down and, funds, even if their dividends
return funds and emerging indeed, in some cases give remain the same. n
markets. This will, of course, Corporate bonds are issued a return. When markets rise,
depend a great deal on your by companies to raise capital. they should also capture
attitude towards risk for return. The bond is a tradeable a portion of the rise. They NeeD MORE
instrument in its own right and achieve their steadier results INFORMATION?
In times of economic its value will tend to rise as through a combination of PLEASE CONTACT US
uncertainty it is even more interest rates fall and remain different strategies. WITH YOUR ENQUIRY.
Offshore investments
For the appropriate investor looking to achieve capital security, growth or income, there are a number
of advantages to investing offshore, particularly with regards to utilising the tax deferral benefits.
You can defer paying tax for the lifetime of the investment, so your investment rolls up without tax
being deducted, but you still have to pay tax at your highest rate when you cash the investment in. As
a result, with careful planning, a variety of savers could put offshore investments to good use.
The investment vehicles are situated The wide choice of different investment by a non-UK resident employer and
in financial centres located outside the types available include offshore redemption performs all of their duties outside the
United Kingdom and can add greater policies, personalised policies, offshore UK, the income arising is only subject
diversification to your existing portfolio. unit trusts and OEICs. You may also to UK tax if it is received in or remitted
Cash can also be held offshore in choose to have access to investments or to the UK.
deposit accounts, providing you with savings denominated in another currency.
the choice about when you repatriate Investor compensation schemes
your money to the UK, perhaps to add Many banks, insurance companies and tend not to be as developed as in
to a retirement fund or to gift to children asset managers in offshore centres the UK, so you should always obtain
or grandchildren. Those who work are subsidiaries of major UK, US and professional advice to ensure that you
overseas or have moved abroad to enjoy European institutions. If you decide fully understand each jurisdiction. It is
a different lifestyle often want to pay as to move abroad, you may not pay any also important to ensure that you are
little tax as is legally possible. tax at all when you cash-in an offshore investing in an offshore investment that
investment, although this depends on is appropriate for the level of risk you
Many offshore funds offer tax deferral. the rules of your new country. wish to take.
The different types of investment
vehicles available offshore include Regarding savings and taxation, If you are an expatriate you should
offshore bonds that allow the investor to what applies to you in your specific find out if you are aware of all the
defer tax within the policy until benefits circumstances is generally determined investment opportunities available to
are taken, rather than be subject to by the UK tax regulations and whatever you and that you are minimising your
a basic rate tax liability within the tax treaties exist between the UK tax liability. Investing money offshore
underlying funds. This means that, if and your host country. The UK has is a very complex area of financial
you are a higher rate tax payer in the negotiated treaties with most countries planning and you should always
UK, you could wait until your tax status so that UK expats in those countries obtain professional advice. Currency
changes before bringing your funds (and are not taxed twice. Basically, if a movements can also affect the value of
the gains) back into the UK. non-domiciled UK resident is employed an offshore investment. n
Pensions
Since April 2006, simpler rules have
been applied to both personal and
company (occupational) schemes. The
new rules allow most people to pay more
into their pension schemes and on more
flexible terms.
Financial
or company) each year, and there is no upper
limit to the total amount of pension saving you
can build up.
independence
Each year you will receive tax relief on your
pension contributions up to 100 per cent of
your earnings (salary and other earned income)
subject to an ‘annual allowance’ above which tax
will be charged.
Retirement for many today is rarely an all-or-nothing If you have little or no earnings and are in a ‘relief
decision, where one day you are collecting a salary and at source’ scheme, you will currently receive
the next your pension. You may have existing pension tax relief for every £80 you contribute in this tax
year and the government will contribute a further
plans in place, like a company pension or personal £20 until the total value of contributions reaches
pension plans. Perhaps you’re just starting to save, are £3,600 for the year.
approaching retirement or have already retired.
Basic state pension
Whatever you want to do, understanding how to build up enough You can claim the basic State Pension from State
retirement savings and how pensions work should help you achieve your Pension age, currently 65 for men and 60 for
future goals. Retirement may seem some way off, but in financial terms women born on or before 5 April 1950. The State
delaying the planning process could have a considerable affect on your Pension age for women born on or after 6 April
future standard of living. 1950 will increase from 60 to 65 between 2010 and
2020. It will increase for both men and women from
We can work with you to help select the most suitable form of retirement age 65 to 68 between 2024 and 2046.
planning strategies applicable to your particular situation, and recommend
what investment opportunities are right for you. We can also advise on You can get a basic State Pension by building
what steps you should take to keep your pension plans up to date by up enough ‘qualifying years’. A qualifying year is
creating a retirement plan that’s tailor-made for you. n a tax year in which you have sufficient earnings
upon which you have paid, any contributions you make on stakeholder pension themselves.
are treated as having paid won’t affect your entitlement contributions up to the annual Your employer will usually
or have been credited to the basic State Pension. allowance described earlier. select a pension provider and
with, National Insurance Non earners may be able to choose a pension scheme
contributions. pay into a personal pension. Company which they think will be suitable
(occupational) for their employees. Such an
You don’t have to claim your You can save as much as pensions arrangement is called a group
State Pension as soon as you you like into a personal Company (occupational) personal pension plan (GPPP).
reach State Pension age. You pension. Each year you’ll pensions are set up by
can claim it later and receive a be able to get tax relief on employers for their employees. A pension taken out through
higher weekly amount or take your pension contributions a GPPP is a personal pension
the option of a one-off taxable up to 100 per cent of your In most cases, your employer and should not be confused
lump-sum payment in addition earnings (salary and other will make contributions to the with an occupational pension
to the normal State Pension. earned income) subject to scheme on your behalf and scheme. You receive tax relief
an ‘annual allowance’ above require that you make regular on your contributions, as
Additional state which tax will be charged. In payments from your salary. described earlier.
pension practice this means that for
You may also be entitled to each pound you put into your A company pension may also If you decide to leave your
an additional State Pension. pension, the government tops offer a death benefit, which is employer you may still be
For instance, if you’re in up your pension pot using paid to your beneficiary if you die able to make payments into
full-time employment and money it would otherwise before them. Your employer may your pension, but you may
make Class 1 National have taken from you as tax. also provide you with a pension pay higher administration
Insurance contributions. before the normal retirement age costs.
When you retire and claim Stakeholder of the scheme if you need to
for a basic State Pension, pensions retire early due to ill-health. Pensions for the
any additional State Pension Stakeholder pensions are self-employed
due will be added. a type of personal pension. However, if you leave your If you’re self-employed
They have to meet certain employer you are unlikely you make class 2 National
If you’ve been a member of government standards to to be able to continue Insurance contributions.
a company pension scheme ensure they are good value. making payments into the These will entitle you to the
you may have paid a lower pension scheme. basic State Pension, but not
rate of National Insurance Stakeholder pensions are open the additional State Pension.
contributions which will to everyone and may be worth You receive tax relief on your If you want to receive more
have qualified you only for looking into if you are self- contributions to company than the basic State Pension
the basic State Pension. If employed or if your employer pensions up to an overall annual when you retire, you might
you do this, most or all of doesn’t offer a company allowance. Some schemes may want to consider starting
your second pension will pension. They allow you to offer you the opportunity to a personal or stakeholder
come from your company contribute as little as £20 a carry on working while drawing pension scheme. You’ll then
pension rather than the month. You don’t have to be your company pension. be able to make regular
State Second Pension. working to contribute to a payments to build up savings
stakeholder pension, and you Group personal for your retirement. n
Personal pensions don’t have to contribute every pensions through
You can start receiving an month if you’re unable to. your employer
income from a personal Some employers offer access
pension from the age of With stakeholder pensions, to a personal pension scheme.
50 (increasing to 55 by 2010). you can start receiving They may also have negotiated NeeD MORE
There’s no limit on the an income from the age lower administration costs with INFORMATION?
number of personal pension of 50 (increasing to 55 by pension providers and make PLEASE CONTACT US
schemes you can set up, and 2010). You receive tax relief contributions to your pension WITH YOUR ENQUIRY.
Generating an
income for retirement
The earliest you are currently permitted to take your retirement a consideration for more substantial
funds or if you have other sources
benefits is from the age of 50, but this is set to rise to age
of income. This allows you to take a
55 from April 2010. If you are considering setting up a taxable income directly from your fund,
conventional lifetime annuity, which pays a secure income for leaving the remainder invested. It is
life, there is now no requirement to buy an annuity by the age of available up to age 75.
75. However, you must start to take your benefits from the age of
Phased Retirement
75, in addition to any tax-free element. Phased retirement is a personal pension
plan and allows you to buy an annuity
The options market. They may be suitable if you have or income drawdown in stages rather
Conventional-Lifetime Annuity other income sources, are prepared to than all at once. It is up to you to decide
A conventional-lifetime annuity converts take a risk to achieve a higher income or how much income you need and when
your pension fund into an income for can accept the risk that your income may you would like to start taking it. You
the rest of your life, however long you reduce. Investment-linked annuities are then cash in as much of the plan as
live. You can add different options and designed to give you the opportunity to necessary to provide your chosen level
purchase different types depending obtain an income that increases during your of income. You can take out a phased
on your needs and circumstances. For retirement. If the risk of an unpredictable retirement plan any time after the age of
example, your annuity can pay out to your and possibly falling retirement income 50 (55 from April 2010).
spouse or partner on your death, or you worries you, then conventional annuities
can choose an enhanced or impaired life may be more appropriate. Alternatively Secured
annuity, which may give a higher income Pension from age 75
than a conventional annuity if you have Unsecured Pension (formerly The government’s A-Day pensions
an illness or medical condition, or are a Income Drawdown) simplification legislation, which came
smoker. A conventional-lifetime annuity Under the option of Personal Pension into force in April 2006, created
is the simplest retirement option and Fund Withdrawal, you can choose Alternatively Secured Pensions (ASPs).
provides a secure, taxable income which to take a tax-free cash lump sum ASPs are available to people reaching
is payable for the rest of your lifetime. immediately and then, instead of buying age 75 who do not want to buy an
an annuity, leave the remainder of the annuity with their pension fund. ASPs
Investment-Linked Annuity fund in a tax-efficient environment. are intended to provide an income in
Investment-linked annuities offer the chance An annual income (taxed as earned retirement for scheme members and
to obtain a higher level of income, but income) can be taken, within prescribed their dependants, rather than be used
you need to be comfortable with linking limits, from the invested pension fund. as a device to pass on tax‑privileged
your income in retirement to the stock This is a flexible option which may be pension funds. n
Transferring pensions
There are a number of different reasons why you may wish to consider transferring your pension
schemes, whether this is the result of a change of employment, poor investment performance,
issues over the security of the pension scheme, or a need to improve flexibility.
You might well have several However, this still may not These pensions rely on performance and make
different types of pension. compensate for the benefits contributions and investment fund monitoring easier.
The gold standard is the you are giving up, and you growth to build up a fund. Transferring your pension
final-salary scheme, which may need an exceptionally When you retire, this money will not guarantee greater
pays a pension based on high rate of investment can be used to buy an annuity benefits in retirement. n
your salary when you leave return on the funds you are which pays an income.
your job and on years of given to match what you
service. Your past employer would get if you stayed in If appropriate to your
the final-salary scheme. particular situation, it may
might try to encourage you
to move your pension away make sense to bring these
NeeD MORE
by boosting your fund with Alternatively, you may have a pensions under one roof to
INFORMATION?
PLEASE CONTACT US
an ‘enhanced’ transfer value money purchase occupational benefit from lower charges, WITH YOUR ENQUIRY.
and even a cash lump sum. scheme or a personal pension. and aim to improve fund
the information you give them to one of the schemes on their database For personal
and inform you of the results. If they have made a match they will provide pension schemes:
you with the contact address of the scheme(s) and you can get in touch n w hat was the name of
your personal pension
with them to see if you have any pension benefits. scheme?
n what address was it run
They will not be able to tell you The Pension Tracing Service n t he type of pension from?
if you have any entitlement will need to know at least scheme you belonged n what was the name of
to pension benefits, only the the name of your previous to. For example was it the insurance company
scheme administrator can give employer or pension scheme. an occupational pension involved with your
you this information and there If you can give them the scheme, personal personal pension scheme?
is no charge for using this following information they pension scheme or a
service which typically takes will have a better chance of group personal pension
about 15 minutes to complete finding a current contact and scheme?
the form. address for the scheme: n when did you belong to
this pension scheme?
To trace a pension scheme n the full name and address of
by phone or post the Pension your employer who ran the For occupational
Tracing Service can be occupational pension scheme pension schemes:
contacted by calling 0845 you are trying to trace. Did n d id your employer trade NeeD MORE
6002 537. Telephone lines your employer change under a different name? INFORMATION?
are open Monday to Friday names, or was it part of a n what type of business did PLEASE CONTACT US
8.00am to 6.00pm. larger group of companies? your employer run? WITH YOUR ENQUIRY.
You can choose protection-only not be able to work and so lose your peace of mind. The benefits only pay
insurance, which is called ‘term income, but you are still alive so your for 12 to 24 months on a valid claim
insurance’. In its simplest form, it life assurance does not pay out. And to if you have an accident, become ill or
pays out a specified amount if you die compound the problem, you may also unemployed. Most of these protection
within a selected period of years. If you require additional expensive nursing care, policies operate a ‘deferred period’,
survive, it pays out nothing. It is one of have to adapt your home or even move which is the period from when a
the cheapest ways overall of buying the to another more suitable property. claimable event happens to when the
cover you may need. policy starts paying out.
Income Protection Insurance (IPI)
Alternatively, a whole-of-life policy formerly known as permanent health Private medical insurance covers you for
provides cover for as long as you live. insurance would make up a percentage private medical treatment and you can
of your lost income caused by an choose to add on extra cover, such as
Life Assurance Options illness, accident or disability. Rates vary dental cover. You may select the hospitals
n W hole-of-life assurance plans can according to the dangers associated where you would want to be treated close
be used to ensure that a guaranteed with your occupation, age, state of to home. As always, the more benefits
lump sum is paid to your estate in health and gender but IPI is particularly and the more comprehensive the policy
the event of your premature death. important if you are self employed or if you select, the more it will cost.
To avoid inheritance tax and probate you do not have an employer that would
delays, policies should be set up continue to pay your salary if you were Beyond taking the obvious step of
under an appropriate trust. unable to work. ensuring that you have adequate
n Level term plans provide a lump sum insurance cover, you should also
for your beneficiaries in the event of If you are diagnosed with suffering from ensure that you have made a will. A
your death over a specified term. one of a number of specified ‘critical’ living will makes clear your wishes in
n Family income benefit plans give a illnesses, a critical illness insurance the event that, for example, you are
replacement income for beneficiaries policy would pay out a tax-free lump pronounced clinically dead following
on your premature death. sum if the event occurred during the an accident, and executes an enduring
n Decreasing term protection plans pay out term of your policy. Many life insurance power of attorney, so that if you become
a lump sum in the event of your death companies offer policies that cover you incapable of managing your affairs as a
to cover a reducing liability for a fixed for both death and critical illness and result of an accident or illness, you can
period, such as a repayment mortgage. will pay out the guaranteed benefit on be reassured that responsibility will pass
the first event to occur. to someone you have chosen and trust.
Simply having life assurance may not be
sufficient. For instance, if you contracted Accident Sickness and Unemployment Of course, all these protection options
a near-fatal disease or illness, how (ASU) can be taken out for any purpose also apply to your spouse and to those
would you cope financially? You may to protect your income and to give you who are in civil partnerships. n
Long-term care
Long-term care provision in the United Kingdom There are basically two any age, but some have a
types of long-term care minimum age for receiving
has been the subject of much debate and analysis insurance (LTCI): the plan benefits of 40 or 50.
over the past decade, yet the issue of how to fund
n Immediate care LTCI - you You take out an insurance
the cost of that care for future generations remains can buy this when you policy that will pay out a
unresolved. Much of the debate has revolved actually need care; and regular sum if you need
around how the State should address the problem. n Pre-funded LTCI - you can care. It pays out if you are
buy this in advance, in no longer able to perform
case you need care in the a number of activities
As you get older, you might You may also qualify for future of daily living (such as
develop health problems that Disability Living Allowance if washing, dressing or feeding
could make it difficult to cope you are under 65 or Attendance Immediate care long- yourself) without help, or
with everyday tasks. So you Allowance if you are over 65. term care insurance if you become mentally
may need help to stay in your Attendance Allowance cannot This can be purchased when incapacitated. The money it
own home or have to move normally be paid if social you have been medically pays out is tax-free.
into a care home. services or the NHS are funding assessed as needing care,
your care in a care home. which can be at any age. Some existing policies may
The State may provide some be linked to an investment
help towards the costs of Although social security You buy an immediate care bond, which is intended to
this care depending on your benefits are the same plan with a lump sum. This fund the premiums for the
circumstances, but there are throughout the UK, other help pays out a regular income for insurance policy. These
also other ways to help you provided by local authorities the rest of your life, which is policies involve more
cover the cost of care, including varies. So you should find out used to pay for your care. investment risk and, in some
using savings and investments. what your local authority offers. cases, can use up your
The amount you pay will capital.
Long-term care refers to care If you don’t qualify for vary depending on:
you need for the foreseeable financial help from the local You typically pay either
future, maybe as a result authority, you will normally n t he amount of income you regular monthly premiums or
of permanent conditions have to pay towards the require a single lump sum premium.
such as arthritis, a stroke cost of care out of your own n whether you want the In either case, the insurance
or dementia. It could mean income and savings – which income to increase, for company usually reviews the
help with activities such as could result in you eventually example, with inflation plan, say every five years,
washing, dressing or eating, having to sell your own home n your age and sex; and and the premiums may then
in your own home or in a care to meet the costs. n the state of your health rise, even if you’ve bought
home (residential or nursing). a single premium policy.
There are many different You’ll be assessed medically Premiums depend on your
You should check with your ways to help you pay for to determine how much you age, sex and the amount of
local authority about any long-term care. must pay for your chosen cover you choose. n
support they give. The social level of income.
services department will assess Long-term care
your care needs and your insurance Pre-funded long-
income and savings. If your Long-term care insurance term care insurance NeeD MORE
income and savings are low the is one way of insuring You can buy this in advance, INFORMATION?
local authority will pay some or yourself against the cost of in case you need care in PLEASE CONTACT US
WITH YOUR ENQUIRY.
all of your long-term care costs. long-term care. the future. You can buy it at
UK Trusts, passing
assets to beneficiaries
You may decide to use a trust to pass n w
hen someone dies without leaving a n money
assets to beneficiaries, particularly those will (England and Wales only) n antiques or other valuable property
who aren’t immediately able to look after
their own affairs. If you do use a trust to give What is a trust? The main types of
something away, this removes it from your A trust is an obligation binding a person private UK trust
estate provided you don’t use it or get any called a trustee to deal with property in
benefit from it. But bear in mind that gifts a particular way for the benefit of one or Bare trust
into trust may be liable to inheritance tax. more ‘beneficiaries’. In a bare trust the property is held in
the trustee’s name but the beneficiary
Trusts offer a means of holding and Settlor can take actual possession of both the
managing money or property for The settlor creates the trust and puts income and trust property whenever
people who may not be ready or able property into it at the start, often adding they want. The beneficiaries are named
to manage it for themselves. Used in more later. The settlor says in the trust and cannot be changed.
conjunction with a will, they can also deed how the trust’s property and
help ensure that your assets are passed income should be used. You can gift assets to a child via a bare trust
on in accordance with your wishes after while you are alive, which will be treated as
you die. Here we take a look at the main Trustee a Potentially Exempt Transfer (PET) until the
types of UK family trust. Trustees are the ‘legal owners’ of the child reaches age 18, (the age of majority
trust property and must deal with it in in England and Wales), when the child can
When writing a will, there are several the way set out in the trust deed. They legally demand his or her share of the trust
kinds of trust that can be used to help also administer the trust. There can be fund from the trustees.
minimise an IHT liability. On March 22, one or more trustees.
2006 the government changed some of All income arising within a bare trust in
the rules regarding trusts and introduced Beneficiary excess of £100 per annum will be treated
some transitional rules for trusts set up This is anyone who benefits from as belonging to the parents (assuming
before this date. the property held in the trust. The that the gift was made by the parents).
trust deed may name the beneficiaries But providing the settlor survives seven
A trust might be created in various individually or define a class of years from the date of placing the assets
circumstances, for example: beneficiary, such as the settlor’s family. in the trust, the assets can pass IHT free
to a child at age 18.
n w hen someone is too young to Trust property
handle their affairs This is the property (or ‘capital’) that Life interest or interest in
n when someone can’t handle their is put into the trust by the settlor. It possession trust
affairs because they’re incapacitated can be anything, including: In an interest in possession trust the
n to pass on money or property while beneficiary has a legal right to all the
you’re still alive n land or buildings trust’s income (after tax and expenses),
n under the terms of a will n investments but not to the property of the trust.
These trusts are typically used to leave Discretionary trust an IHT charge of up to 4.2 per cent of
income arising from a trust to a second The trustees of a discretionary the value of the trust assets.
surviving spouse for the rest of their trust decide how much income or
life. On their death, the trust property capital, if any, to pay to each of the It has not been possible to create
reverts to other beneficiaries, (known as beneficiaries but none has an automatic accumulation and maintenance trusts
the remaindermen), who are often the right to either. The trust can have a trust since March 22, 2006 for IHT
children from the first marriage. widely defined class of beneficiaries, purposes. Instead, they are taxed for IHT
typically the settlor’s extended family. as discretionary trusts.
You can, for example, set up an interest
in possession trust in your will. You Discretionary trusts are a useful way Mixed trust
might then leave the income from the to pass on property while the settlor is A mixed trust may come about when
trust property to your spouse for life and still alive and allows the settlor to keep one beneficiary of an accumulation
the trust property itself to your children some control over it through the terms and maintenance trust reaches 18
when your spouse dies. of the trust deed. and others are still minors. Part of
the trust then becomes an interest in
With a life interest trust, the trustees Discretionary trusts are often used to possession trust.
often have a ‘power of appointment’, gift assets to grandchildren, as the
which means they can appoint capital flexible nature of these trusts allows the Trusts for
to the beneficiaries (who can be from settlor to wait and see how they turn out vulnerable persons
within a widely defined class, such as before making outright gifts. These are special trusts, often
the settlor’s extended family) when they discretionary trusts, arranged for a
see fit. Discretionary trusts also allow for beneficiary who is mentally or physically
changes in circumstances, such as disabled. They do not suffer from
Where an interest in possession trust divorce, re-marriage and the arrival the IHT rules applicable to standard
was in existence before March of children and stepchildren after the discretionary trusts and can be used
22, 2006, the underlying capital is establishment of the trust. without affecting entitlement to state
treated as belonging to the beneficiary benefits; however, strict rules apply.
or beneficiaries for IHT purposes, for When any discretionary trust is wound
example, it has to be included as part of up, an exit charge is payable of up to Tax on income from UK trusts
their estate. 6 per cent of the value of the remaining Trusts are taxed as entities in their
assets in the trust, subject to the reliefs own right. The beneficiaries pay tax
Transfers into interest in possession for business and agricultural property. separately on income they receive
trusts after March 22, 2006 are from the trust at their usual tax rates,
taxable as follows: Accumulation and after allowances.
maintenance trust
n 2
0 per cent tax payable based on An accumulation and maintenance trust is Taxation of property
the amount gifted into the trust at used to provide money to look after children settled on trusts
the outset, which is in excess of the during the age of minority. Any income that How a particular type of trust is
prevailing nil rate band isn’t spent is added to the trust property, all charged to tax will depend upon the
n Ten years after the trust was of which later passes to the children. nature of that trust and how it falls
created, and on each subsequent within the taxing legislation. For
ten-year anniversary, a periodic In England and Wales the beneficiaries example, a charge to IHT may arise
charge, currently 6 per cent, is become entitled to the trust property when when putting property into some trusts,
applied to the portion of the trust they reach the age of 18. At that point the and on other chargeable occasions –
assets that is in excess of the trust turns into an ‘interest in possession’ for instance, when further property is
prevailing ‘nil rate band’ trust. The position is different in Scotland, added to the trust, on distributions of
n T he value of the available ‘nil rate as, once a beneficiary reaches the age capital from the trust or on the ten-
band’ on each ten-year anniversary of 16, they could require the trustees to yearly anniversary of the trust.
may be reduced, for instance, by the hand over the trust property.
initial amount of any new gifts put Trusts are very complicated, and you may
into the trust within seven years of Accumulation and maintenance trusts have to pay IHT and/or Capital Gains
its creation that were already established before Tax when putting property into the trust.
n There is also an exit charge on any March 22, 2006, and where the child is If you want to create a trust you should
distribution of trust assets between not entitled to access the trust property seek professional advice. n
each ten-year anniversary until an age up to 25, could be liable to
Business Stategy
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In today’s business environment, with budgets under constant need to insure their company property, equipment and
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solutions. Employee benefits should be regularly reviewed to important assets, the people who drive the business, and
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Many employees today expect to have access to death-in- Receiving the appropriate professional advice can help to
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package. Some also look to employers who give them the efficient manner. Services offered to corporate clients include:
option of being part of a flexible benefit scheme that enables
them to select their own benefits from a menu, using an agreed n Corporate investments
allowance that provides a more tailored employee choice. n Individual pension plans
n Key person insurance
A business that wants to retain or recruit directors or senior n Partnership insurance
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Whatever the size of your business, if you require
It’s also important to protect your business against the objective professional advice on corporate financial
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shareholders or partners. Many businesses recognise the further information. n
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