HOW MUCH IS A MUM OR DAD WORTH?

While on the subject of life assurance, it is interesting to look at some research done last year on the value of a Mum or Dad – just on the cost of replacing their work at home and in looking after the children, should one parent die or be ill and unable to work. The value of a Mum works out at £30,032 and a Dad at £21,306! The same research showed that only 53% of parents in the UK had life assurance and only 24% had Critical Illness cover. Both of these have gone down by 4% in the last two years. We would like to assist you to ensure you have the cover that you need and want. Just give us a ring on 01342 313302 now!

UNISEX INSURANCES!?

A European Court Directive (the EU Gender Directive!) is coming into effect later this year which will require all insurance companies to treat men and women equally as regards what they are charged for insurances. This goes against common sense when life assurance has always been cheaper for women because statistically they live longer than men. On the other side of the coin, men taking their pension benefits have always benefited from a higher income from their annuity because men will not live as long and the pension provider therefore does not have to pay out the income for as long as for a woman of the same age. Common sense, however, has not been much of a feature of European Court Decisions. This does open a window of opportunity for men to take their annuities before the end of the year and for ladies to secure their life assurance now before the costs go up. There is a further matter that is likely to drive up the cost of life assurance in the coming year. A new tax arrangement being imposed on insurers will require them to keep more in reserves to safeguard their financial position. This will translate for the average person into higher costs for their insurances. We may never again see life assurance costs as low as they are now. Do contact us to discuss how this could affect you and what you might or might not be able to do to take advantage of this "Buy Now" – 01342 313302.

FIDDLING WITH THE ODDS

Please note that 2012 may be a good time for men in their 60s to take their annuities as some European legislation is changing the odds come the end of the year. The statistics have always shown that women, on average, live longer then men and annuity rates have reflected this. In December of this year, however, the European Court of Justice in its wisdom has dictated that both sexes must be treated equally in the matter of insurances. As regards annuities, this is likely to mean that men will get slightly worse annuities and women slightly better ones. So for those men who are in their mid to late 60s or older, it is probably a good time to get their annuity.

ANNUITY OPTIONS

The above is the simple concept. However, there are many different annuity options that are available to choose from. Husbands and wives can decide to take out an annuity that will pay as long as they both live. You can decide to take an annuity where the money paid starts lower and increases each year, or you can take a higher payment, which stays the same. Those who have been heavy smokers or have serious medical issues can get Enhanced Annuities. Those are simply higher payments taking into account the odds that such a person is not going to live as long as the average person. We will be happy to cover all of the options for you but we wanted to help you understand the basic principle that underlies what you are likely to be involved with when you cash in your Pension Box.

THE MARKET FOR ‘ANNUITIES’

When the time comes and you start looking for an ‘Annuity’, you will find that there is a marketplace for ‘Annuities’ just as there is for apples or pears. You can go out into the marketplace and look for the best deal for the money left in your Pension Box. So “How much will I get for my money?” you may well ask. The answer is, of course, it depends on what is available in the marketplace. Here it is worth looking at just how a company works out what they can offer as an ‘Annuity’. In fact, the company is taking a gamble. They know that they can invest the money you give them and it is from that investment that they will need to cover their payments to you as well as their costs and profit. The company uses its actuaries (professional gamblers basically!) to calculate the odds of how long you are going to live. That will tell them how long, on average, they are going to have to make payments to you. The actuaries use the information available which essentially gives the life expectation for a person of a given sex and age. These are the odds that they work with, along with what investment return they can be sure of over a longish period of time. So what affects the market price of ‘Annuities’? The longer we live, the longer the companies have to pay out so the less they are likely to offer. The lower the investment return they can get over the long term, once again, the less they can offer.

New “Buy Now” for your ISAs

With the beginning of the new Tax Year (2012/2013), there is the immediate opportunity for doing your new ISA savings/investment. You do not need to wait until the end of the Tax Year. In the case of a Cash ISA this gives you an extra 12 months of tax-free growth if you do it now. With a Stocks and Shares ISA you would be buying at what looks to be a low point in the Market and avoiding the end of Tax Year rush, which tends to drive up investment fund costs.

THE ‘ANNUITY’

Basically an ‘Annuity’ is a guaranteed income. When you buy an ‘Annuity’, you basically are swapping the 75% cash remaining in your pension box for an income guaranteed for life (Note: we will deal only with the guaranteed annuity for life here, but there are other varieties as well which we will be happy to discuss with you.) So the money in the Pension Box goes to the annuity company who provides you with the guarantee of an income for as long as you live. Many of you will immediately ask: “Can I trust them to pay me as they promise?” It is a good question and the answer is that Government provides a guarantee that ensures the annuity will continue to be paid even if the company concerned goes under.