Business column: Add a little certainty to your future

Tim Reedman
Tim Reedman

We live in economically-challenged times. The threat of further recessions, rising unemployment, and a second global banking crisis have left many people with less money in their pocket to spend.

Many parents will have some level of life cover in place, typically enough to pay off their mortgage should the unthinkable happen, but protecting your family is more than buying a simple life insurance policy.

The harsh and sad fact is, that we are very likely to be close to someone who gets a serious illness. Take cancer, for instance. According to Macmillan, the cancer charity, one in every three of us will be diagnosed with cancer and one-third will be below the age of 65 (Source:, October 2012).

What’s more, every year 275,000 people suffer a heart attack, of which some 155,000 of those people will survive (Source:, August 2012).

Taking out a critical illness policy can offer some financial reassurance. These policies promise to pay out a lump sum not when you die but on diagnosis of a specified condition, for example cancer, a stroke, heart attack, kidney failure or multiple sclerosis.

Critical illness cover can be more complex than some other financial products. Consumers often fail to understand what they are covered for and, more importantly, what is not covered, so it pays to get expert help before signing on the dotted line.

Sickness benefits can vary substantially. If you are off work because of sickness your long term incapacity benefit will be £101.35, based on 2013/14 levels. An income protection policy is worth serious consideration as it is designed to pay out a monthly sum of money until you die, or more optimistically you reach retirement, return to work or recover from the illness. For example, a 20 year old taking a plan out with a retirement age of 65, who has an accident just after the plan is issued and can never work again, would get a monthly payout for 45 years. Therefore a plan with an income benefit of say £1,000 per month could potentially pay out a total of £540,000.

It is not just younger people that need to consider all eventualities. By the time your fiftieth birthday has been and gone, there is every chance that your children will have flown the nest and that your mortgage is, all but, paid off. But that doesn’t mean you should stop thinking about insurance and protecting your family, wealth and health.

You will have seen whole of life assurance for older people advertised on day-time television or have received mail shots through your letterbox from an insurer selling over-50s plans to cover funeral costs. However, whole of life assurance policies do more that simply cover funeral costs. They can, amongst other things, also help against a potential inheritance tax (IHT) bill.

Inheritance tax is currently paid on the excess of an estate worth more than £325,000 or over £650,000 if you are married or have a civil partner, where the full benefit has been passed to the surviving spouse. A common way to prepare for IHT is to take out a whole of life assurance policy in trust, which provides a sum of money that can be used to pay the IHT bill after you die. The proceeds of the policy do not form part of your estate, provided it is in a trust. So if your estate is expected to be liable for an IHT bill of, say £30,000, you take out a policy for that sum to cover it.

Many people think of financial planning as creating wealth. It is, but it is also about protecting what you already have. These are nervous times, which are riddled with uncertainties. With a little bit of thinking - and some expert guidance - you can add some certainty to your financial future.

To receive a complimentary guide covering wealth management, retirement planning or inheritance tax planning, produced by St. James’s Place Wealth Management, contact Tim Reedman, of St. James’s Place on 01243 788567, or 07738 832115, by email or visit