Financial Planning - Overview

We have sent our four intrepid business start up candidates for a financial health-check provided by Andrew Jackson a local Independent Financial adviser.

To give you a brief overview of Andrew, he is an Independent Financial Adviser (IFA), mainly operating in the Bolton/Bury area, registered with the Financial Services Authority through an IFA firm called Positive Solutions (Financial Services) Limited. As an IFA Andrew is in a position to offer unbiased financial advice tailored to his clients individual needs, and recommend the most suitable products to meet their requirements after researching the entire market place - whether that’s a great mortgage/remortgage deal, the cheapest life assurance or top performing investment.

At all times Andrew acts on his clients’ behalf. Andrew can provide face-to-face Independent Advice at a time and place to suit his clients. If you feel that you would

benefit from a no obligation consultation, please contact Andrew on 07881-427642, e-mail him at

andrewjackson@thinkpositive.co.uk

or visit his website www.AndrewJacksonIFA.co.uk

Tina

As Tina is a single mother with two pre-school children, first and foremost she should review what protection provision she has in place and give consideration to Life Assurance – this would pay out a tax free lump sum or a regular monthly income in the event of her death, ensuring that the people who depend upon her would be financially secure should the worst happen.

Critical Illness Cover should also be a priority – Tina would receive a tax-free lump sum if diagnosed with a specified critical illness (most CIC policies would also provide an amount of cover for Tina’s children).

The case study shows that Tina is employed but would like to set up her own cake making business. As there is uncertainty when setting up a business I would ask her to think about protecting the income she receives from her “job” with an Income Protection plan which would pay a regular monthly sum if she was unable to work for an extended period due to illness or injury.

In addition to any pension provision Tina has with her employer, she could also undertake additional retirement planning and set aside some of the money she earns from her cake making business into a Personal Pension Scheme (PPS) or a Stakeholder Pension (SHP). This is a tax efficient way of saving for the future – Tina would receive tax relief on her pension contributions and at retirement could take a tax-free lump sum in addition to pension income.

Over time peoples circumstances change and, if she can manage it on her low income, Tina should also think about saving – this would help in maintaining an emergency fund, pay for holidays, possible education costs, and maybe a

future house deposit as Tina is currently renting. An ISA (Individual Saving Account) would be a good idea as this is a tax efficient way of saving. Tina could have a Cash ISA, a Stocks & Shares ISA (dependent upon her attitude to

investment risk), or a combination of both – the current ISA allowance is £7,000 per individual, per tax year.

Though Inheritance Tax is not an issue at present, Tina should consider arranging a Will.

Matthew

The case study tells us that Matthew is 53, owns his own property, and is divorced with 3 grown up children. As he doesn’t have any financial dependents or commitments protection isn’t a priority for Matthew, however he may wish to think about Life Assurance, which could provide a legacy (in addition to his property and any savings/investments) for his children in the event of his death.

If Matthew doesn’t have any Critical Illness Cover he should give it some consideration especially as he is totally financially dependent upon himself – unfortunately, the older we get the more expensive protection premiums become and, though CIC should be an important priority for Matthew, at 57 the premiums may be prohibitive. Permanent Health Insurance (PHI) and/or a private medical insurance plan would also be a good idea for Matthew.

Matthew’s case study also informs us that he has been made redundant, and hopefully any redundancy payment that he received would assist him in the setting up of his limited company. If additional funding is required he could consider releasing equity from his home by remortgaging, or look at commercial borrowing.

Matthew is probably considering the future sale of his new limited company in his retirement planning, but he may wish to give some thought to a PPS/SHP and benefit from the available tax relief he would be entitled to. We don’t know what the value of Matthew’s property is or what he has in savings and investments, so we don’t know whether Inheritance Tax is an issue so, like Tina, he should consider arranging a Will.

Gary & Bob

First of all, in the present financial climate, I would recommend care and caution to anyone entering the property development business. However, if property prices continue to fall and funding is not an issue, opportunities may arise – though fortitude would be required as it could take some time to sell on the renovated properties.

The case study shows us that Gary and Bob both have wives and children so they should give priority to ensuring they have adequate protection plans in place – Life Assurance, Critical Illness Cover, Family Income Benefit, etc. As Gary and Bob intend to become self-employed (if they aren’t already), like Matthew they should think about PHI and or a private medical insurance plan.

We don’t know how much Bob has in savings or investments but we do know he has been left £50,000 by an aunt. He could use this money to invest into the property development business or he could consider paying off the £10,000 outstanding mortgage loan he has. However, mortgage interest rates are still relatively low so he may wish to use this money and remortgage to raise his share of the capital required for the setting up of the business.

Gary has no mortgage on his home (left to him by his Grandma), and as the case study doesn’t tell us whether he has any savings he can use for business purposes, he may wish to give consideration to remortgaging to raise his share of the capital.

Any remortgaging should be done with the consent of Gary and Bob’s wives, and the prospective lenders should be informed that the remortgage monies are to be used for business purposes.

If they are concerned about selling on the properties they plan to buy, they may wish to think about the “Buy to Let” option. If Gary and Bob do not wish to release equity from their homes to raise business capital, like Matthew they could consider commercial borrowing.

Additional protection would be strongly recommended in respect of any additional borrowing taken on by Gary and Bob.

The case study doesn’t tell us what retirement planning, if any, Gary and Bob have in place, and like Tina and Matthew in the other case studies, they may wish to give some thought to PPSs/SHPs** and benefit from the available tax relief they would be entitled to.

As with previous case studies, if Gary and Bob do not currently have Wills in place, they should give thought to arranging them.

The Benefits of seeing somebody like Andrew

Independent Financial Advice

Provides you with unbiased financial advice tailored to your individual needs - the most suitable products or services to meet your requirements after researching the entire market place - whether that’s the cheapest life assurance/protection product, a great mortgage/remortgage deal, or a top performing investment.

Protection

Peace of Mind. Are you and your family adequately protected? What would happen in the event of your death?

Protect your life, family, health, income, home, etc.

ISA

A tax efficient way of saving. Option of Cash ISA or, for the potential of greater growth, a Stocks & Shares ISA dependent upon attitude to investment risk.

Retirement Planning

A Pension is a tax efficient way of saving for your retirement. Have you planned for the future? Are you on course for a comfortable retirement?

Remortgaging

Potentially find a better mortgage rate than you have with your current lender, therefore saving you money, or release equity from your home for a second home, home improvements, business use, etc.