So how could pensions advice help you?

• If you have a private pension fund or are part of a “defined contribution” workplace pension scheme, and are just coming up to retirement, it’s really important that you seek pensions advice. Most pension administrators start moving pension fund investments out of equities and into bonds in the years coming up to retirement, in order to guard against losses on the stock market in the final years. However, if you are thinking of deferring your retirement for a few years, this could stop you from benefiting from a future recovery. Talk to a pensions adviser to help you decide whether you should ask your pension administrator to stop this automatic transfer
• If you can’t afford to defer your retirement, and you are worried that your fund is losing value, one option would be to make it “paid up” by stopping contributions. Alternatively you could take your tax-free lump sum, which might enable you to deal with any short-term financial difficulties, and leave the remainder invested in the hope that it might recover some of its losses. Either of these options has implications for your future financial situation, so you do need to take pensions advice.
• A lot of people are feeling the pinch financially just now and you may be one of them. You feel the need to cut back on something and pension contributions seem an easy target – they seem less immediate than food, fuel or mortgage payments. But if you’re thinking about this, do take pensions advice. The adviser should be able to discuss ways in which you can economise on contributions without risking your whole pension.
• Perhaps you have just been made redundant, or are about to be. Should you use all or part of your redundancy payment to buy a pension plan? This is a difficult decision and you should discuss it with an adviser.

These are worrying times for many of us, but it’s important for everyone to be able to look forward to a secure retirement. Whether or not you are approaching retirement age, you may well have concerns about your pension provision. If so the sooner you seek pensions advice the better. Contact us to discuss your retirement options with one of our Financial Planners and you should soon feel more positive about your future.

©2010 KMS Finance. All Rights Reserved.

• Spouse or partner
• Dependants
• Mortgage
• Loans or debts
• Standard of living
• Existing life cover
• Death in service from employer
• Current savings and investments
• Future planned expenditure

It is generally accepted that if you have no partner or dependants then your need for life cover is very low. If you have mortgage then you may wish to cover this in the event of death as the cost is relatively low. However, there is no real financial need for this to be in place.

Dependants

If you have dependants then life cover needs to be seriously considered. Cover needs to replace the lost income of the main earner.

Mortgage

Again, if you have a partner or dependants then covering the full mortgage in the event of death is essential so that they have a home to live in. Without this cover, should the mortgage payments be unaffordable your family will either have to sell the property or eventually it will be repossessed due to non-payment of the mortgage.

Loans or debts

Providing cover for loans or debts may depend on how much they cost. However, the cost of the life cover is likely to be quite low.

Standard of living

The amount of life cover needed is reflected by how quickly it will be spent!  If your family has high annual expenditure and you wish this to be maintained then life assurance cover needs to provide for this.

Existing cover

Any calculations for the amount of life cover needed should include a provision for existing cover. These can be deducted from the overall total thus giving you a shortfall figure to cover.

Current investments

Unless there are other plans for this money then these can be included as assets and can be deducted from the life cover shortfall figure.

Future planned expenditure

This is thinking ahead and could also be related to standard of living. If you intend your children to be privately educated then a provision needs to be made for school fees. Also, if you wish your children to go to university then additional money needs to be set aside for this.

Many advisers will take your annual salary and times by a factor of ten to establish the amount of cover needed. This does not accurately reflect all the points above. The only real way to calculate the amount of life cover needed is to work out a monthly/annual budget planner and then calculate the capital sums needed in addition. These would be university fees for example which will only be payable for a few years.

Let’s presume all mortgages have been repaid and you need £2000 per month income for your dependents. We could establish a Family Income Benefit (FIB) policy that will pay out £2000 per month until your youngest child is 21. Or we could provide a lump sum of £480,000 which when invested should yield 5% per annum. As a safeguard, this annual yield figure can be adjusted downwards and so increases the lump sum initially required.

You will then need to decide whether the policy is a joint life policy, life of another or written under trust. These decisions should not be take lightly and we recommend speaking to one of our Financial Planners for an expert opinion. Our advisers can source a competitive term assurance policy to suit your life cover needs.

©2010 KMS Finance. All Rights Reserved.

The one aspect of life cover that does change is the cost. Life assurance companies regularly review how much they charge according to their own mortality statistics, profit margins and market share.  All life cover costs rise as we get older, unfortunately we are more likely to die as each year passes. You also have the added risk of illnesses. If you were to suffer a serious illness then it could be nearly impossible to buy life cover, or the premiums would be so high as to make it unaffordable. No one knows what’s lurking around the corner.

However, with a term assurance plan with guaranteed premiums, once you have taken out the plan then the premiums are guaranteed and fixed for the life of the policy.

So it does pay to take out a policy sooner rather than later as each year the cost of buying a term assurance plan will rise. However, it is important to buy death cover for the right reasons, what’s the use of paying for something that you don’t really need?

• If you have a mortgage then generally you will want this to be repaid on death
• If you have a family and dependents then you may wish to provide additional funds for them
• If you have a business you may want to cover any business loans or Keypersons

Term assurance policies come in a few different styles such as Level Term Assurance, Mortgage Protection, Renewable Term, and Convertible Term. You also have extra options such as waiver of premium and critical illness cover.

To make sure you get the right life cover for you it would be best to seek advice from an experienced financial planner. These advisers have the knowledge and experience to set up a policy that is suited for your needs and budget.

©2010 KMS Finance. All Rights Reserved.

The next step is to decide where to get your buy to let mortgage. Do you just go to your existing lender? Do you find a company who advertise that they consider buy-to-let mortgages? Or do you look for a buy to let broker?

A lot depends on where you are buying your investment property and what sort of property it is. But you will also find there is a huge range of buy-to-let mortgage lenders and their rates vary widely. How can you be sure of getting the best deal?

• Some lenders will only lend a percentage of the purchase price – say 75% or 80%. Will this be enough for you, or will you require a larger amount?
• Many lenders of buy-to-let mortgages require to know the potential rental income as well as the purchase price, in order to decide on the amount of the loan.
• Certain lenders are very fussy about what kind of property they will lend on. For instance they may turn up their noses at premises above a shop, or an ex-council flat in a tower block. If you are interested in a property of this kind, how do you find a lender that will help you?
• Again, some buy-to-let mortgage lenders have restrictions about the type of lending you want to do. They may object to students, or any kind of multi-occupancy rental.

So if you don’t immediately find a buy to let mortgage lender who can meet your exact needs, how do you go about searching for the right one? Do you work your way through the mortgage lenders section in the Yellow Pages? Or look at all the Internet sites for mortgage lenders? Apart from being extremely time-consuming, the problem is that most of them won’t make it clear on their sites or on an introductory phone call just exactly what their rates are or what they do or don’t accept. On the whole, the best advice is to find an independent mortgage broker who offers buy to let.

The advantage of a broker in trying to find a buy to let mortgage is that the broker will have access to all the lenders in the market and will be able to make a valid comparison of rates and requirements. This will help you be sure you are finding the best deal.

©2010 KMS Finance. All Rights Reserved.