If in doubt, disclose

When taking the decision to buy any type of protection policy, you do so to gain the peace of mind that, should something happen, your income or your family will be covered. However, we are continually hearing that policy providers find ways to turn down claims - and always this happens just when the people concerned needed the money most. So why would a provider turn down a claim? The primary reason will be that the insurer finds some incorrect, missing or incomplete information on the original application forms. This is called 'non-disclosure' and examples include details such as claiming to be a non-smoker, reducing your weight significantly, not checking the status of a dangerous hobby (sailing, skiing or maybe even horseriding) or simply not owning up to an existing medical condition, even if you thought at the time it was irrelevant. If such details are uncovered, they can make any policy you thought you bought in good faith, completely invalid. For this reason, particularly for any sickness related plans (eg: critical illness or income protection), it is sensible to seek Independent advice. Such plans may all carry the same name but the conditions they cover and the exact definitions they use for those conditions can vary widely. Covering yourself against any unforseen circumstance can appear to be an expensive business when you first start the conversation. It is therefore absolutely vital that you get the type of cover right - and don't give your insurer any reason to be able to get out of your claim should you ever have reason to need it.

Planning for a market downturn

As an investor, you understand that different asset classes and industry sectors are liable to turn against you from time to time. Despite equities' long-term potential, both the meltdown of the 'dot.com' boom and, more recently, the credit crunch fallout demonstrate things are much less certain in the short term. Similarly, bonds are viewed as medium to lower-risk investments, particularly when economic growth is on the wane. However, holders of some bonds over the period since the crunch first hit would have suffered. Many investors, faced with such downturns, tend to panic. They see only the shortterm loss on their portfolio balance sheet and forget their reasons for investing. Sadly, this is the worst thing they can do – and it is why planning at the outset of any investment is worth every minute spent. If you know why you are investing and understand fully the risks involved, market downturns should never have such an impact. If you are far-sighted and have a degree of nerve, they can even be an opportunity. Such downturns can be wide-ranging and indiscriminate, meaning the share prices of high-quality companies can suffer alongside lower-quality peers. This gives canny investors the opportunity to add to their portfolio at bargain prices. However, for most, the best strategy is simply to protect yourself while the market settles down. Nothing in a portfolio is more valuable than the time you spend achieving balance, diversification and cementing that long-term objective.

How to build your portfolio

The word 'portfolio' is simply a shorthand term for the collection of investments you own across all your accounts. Ideally this will be spread across a variety of assets - equities, bonds, property and cash - in a mix that has been determined by that your specific objectives. The process of deciding how much to invest in each asset class is known as asset allocation. For example, equities have traditionally offered higher returns over the long term but at the price of increased risk while, at the other end of the scale, cash has offered both security of capital and stability but with a fluctuating income and no chance of capital growth. Actual returns are dependant on many variables, such as the health of the economy in which you are invested, inflation, interest rates and market sentiment. The elements that impact each asset class vary and as a result, one asset might be doing very well at the exact same time another is doing badly. However, it is difficult to predict which one will be doing well - or badly - at any one time. Hence, if you mix the asset classes together and have a little bit of exposure to each, this can help balance out the peaks and troughs of the individuals. Your age, your financial position and your attitude to risk are all crucial considerations to make sure you get the proportions right and build the most appropriate portfolio. It is therefore helpful to speak to an expert who can more easily help you achieve the right mix.

Save thousands with salary sacrifice

High earners should exploit salary sacrifice rules when planning their pension saving, allowing them to avoid some of the tax rises imposed by the Budget and pre-Budget report.

In brief, from 6th April a 50% upper rate of tax has been introduced for income over £150,000, and the personal allowance (the first slice of income on which no income tax is due) is also to be gradually removed. Currently staning at £6,475, this allowance will reduce and completely disappears for those earning approximately £113,000 or more. From 6th April 2011, National Insurance contributions will also increase by 1%, both for employees and employers.

These rises coincide with a wider range of changes that will make pension saving less tax efficient for those with high incomes. For the moment, those with incomes of more than £130,000 are to be hit, but are the government just lining up for further changes?

These changes make the option of salary sacrifice, where people give up some of their salary in return for an employer pension contribution, more attractive.

What can parents do to save enough for their children's higher education?

Universities are expected to cut their budgets. There are also calls to stop subsidised tuition fees for higher earning families. Experts predict the change will be aimed at households with annual incomes of more than £25,000, so the middle classes will be hardest hit by any possible changes. With fees likely to rise, and the lack of likely financial support, the rising costs of living, and so on, is it surprising that so many students graduate with debts in excess of £20,000? The debate for many parents is whether or not they should be supporting their children.

When considering university education, as a parent you should be asking:
1. What will it cost to send my child to university for a year? As a rough guide you might consider:
Tuition fees £3,000
Accommodation £5,000
Books, beer and beans on toast £4,000
TOTAL £12,000
2. Can I afford it?
3. Before committing a great deal of hard-earned cash, is your child suited to university and will future employers see the benefit of this huge investment once your child is “released” into the big wide world?

So the question is, how best to provide the right amounts, at the right time in the most tax-efficient, least volatile and secure manner.

Cash provides security, but in today’s low interest rate climate, most deposit accounts offer little potential for growth. You could consider Cash ISAs, where the interest will be payable with no further liability to income tax, but again you need to do your homework to ensure you get a decent rate, and review it regularly.

Investments in equities over the long term might prove to be a more favourable choice. But, that all assumes you have time. Our advice would be to start as early as you can – the longer you have to save the less you need to put aside each month.

Some will favour child trust funds, but I have to say that I am not a fan of giving children control of large sums at a young age. They might prefer the beach in Bali, or might have some awful boy/girlfriend in tow! If the money is in the parent’s name, they retain control. You may agree to fund Bali or the awful boy/girlfriend, but it will be your choice!

Where to find advice you can trust

Saturday's Telegraph Your Money article was excellent. They focussed on the achievement of the nine regional winners of the New Model Adviser of the Year award.

All nine winners shared some positive characteristics, which might help consumers dtermine whether their IFA is the right one for them:

Genuinely fee based - and so more likely to provide unbiased advice. These advisers all had clear charging structures.

Highly qualified - all were either run by or employed IFAs who have qualified as either certified financial planners (CFP) or chartered financial planners. These are the two highest qualifications IFAs can attain. Don't confuse CFP with the certificate in financial planning, which is the most basic qualification all IFAs must have.

Satisfied customers - all the winners regularly survey their customers to see if they are satisfied. Not only were the results good, the fact they conduct the surveys showed these were well-run firms.

I'm delighted that we at Jane Smith Financial Planning can also offer these same characteristics!!!

Covering childcare costs that never end!

Many parents have bought life policies in the past assuming their children would be independent at 18. New research shows parents are funding their children for much longer, so new protection options are needed.

Gone are the days when your little ones flew the nest at age 18, leaving you to breathe a sigh of relief that your current account might at some point recover. Becase of the difficult economic environment, parents today cannot expect to get their financial freedom back until their children are much older.

Day-to-day living is more expensive, jobs harder to come by, and house prices are high with loans often difficult to obtain without paying a large deposit or a very high rate. According to The Children's Mutual, 93% of parents are still providing towards their childrens' finances until they are 30, and 16% of parents are still supporting their children beyond the age of 30.

This raises the question, do parents have sufficient protection in place? Even if they have sensibly planned ahead to ensure their offspring are financially supported, will that support continue if something should happen to one or other of the parents?

With children being financially dependent for longer, it makes sense to review existing policies to see whether the sums assured allow for the extra money that older children now need from their parents.

It seems that providing a secure financial future for their children is becoming an ever-expanding financial commitment for parents. This makes it vital to keep protection cover up to date with changes in the social and financial landscape.