It is that time of year when we meet up with our families, over eat and catch- up with relatives who, perhaps, we only see once a year. As a Financial Advisor, one of the things I ask people is what is most important to them and eventually, after mentioning their car or their I Phone, I get the answer that it is their loved ones, of course! However, interestingly, our families and our dependents, generally, are the very areas of our lives that we insure least! The health and the financial well-being of one’s family cannot be overstated yet the truth is that many of us are more willing to insure our pets, our cars, our  possessions and even  the’ Sky ‘satellite dish instead of spending a few pounds a month on a Life, Critical Illness or on an Income Protection Plan.

I read an article the other day that said that 77% of British adults have no idea of the new Isa rules that came into effect in July 2014.

The changes were supposed to make ISA’s more attractive to investors and simpler however there is a general feeling that the changes have not been explained well enough. Perhaps the radical changes in pensions and the Lamborghini effect has played its part in distracting us!

Here is a summary of what has changed:

•     New ISA annual allowance- the ISA allowance (the amount you can invest each tax year) has risen to £15,240.
• Improved flexibility- historically there were restrictions on how you could split your allowance between Cash ISAs and Stocks & Shares ISAs. Now you can split your allowance as you choose.
• New death benefits- investments are normally subject to Inheritance Tax (IHT) of 40%, if the total value of your estate exceeds the ‘nil-rate band’. This is currently £325,000 for individuals, or up to £650,000 if you inherit your spouse’s or civil partner’s unused allowance. Changes announced in the Autumn statement mean that surviving spouse’s will have an additional ISA allowance, equal to the amount the deceased spouse had in their ISA.
• Improved transfer options- you can now transfer from a Stocks & Shares ISA to a Cash ISA, and vice versa. Under previous rules you could only transfer from a Cash ISA to a Stocks & Shares ISA. This removes one of the biggest barriers to transferring Cash ISAs to Stocks & Shares ISAs – that you couldn’t transfer back again. With interest rates remaining at historic lows, we are seeing increased interest from investors who are happy with the risks and are looking to transfer their Cash ISAs to Stocks & Shares ISAs
• Earn tax-free interest in Stocks & Shares ISAs- you have always been able to hold cash in a Stocks & Shares ISA, but interest was, in effect, paid net of basic rate tax. Under the new rules interest on cash in a Stocks & Shares ISA is paid gross and is completely tax-free.    Cash ISAs remain unchanged.

If you are interested in making the most out of this new flexibility please do not hesitate on give us a call.

Chris Dixon Dip PFS

Director.

Imagine you have just been offered a great premium for your practice’s group locum and you are just about to switch providers . Just before you do you notice something in the small print called a ‘pre-existing condition clause’. Most companies now cover themselves with a pre-existing condition clause. This usually means that regardless of who is covered if they have been off work for 5-10 days (varies on provider) for a ‘pre-existing condition’ then they are not covered for a set period of time.

Now initially this doesn’t seem too bad (depending on time scales) but then let’s consider that recently a competitor has released a policy with a THREE year pre-existing condition clause! However what if you have a bunch of really healthy Doctors and Professionals who haven’t been off for the last 3 years? What does it matter then? Well it does, and it’s something I call the pre-existing ‘spin cycle’. Let me ask a question, who are the most expensive people to cover for?  I believe it is the individuals who are off with a recurring condition. This could be stress, back or even something like a trapped nerve. Those pesky reoccurring illness’s that just won’t go away and makes it challenging for a practice manager to cover as you never know when they are going to strike! To illustrate my point let’s look at this example:

Policy taken out on 1st Jan 2012 with a 3 year pre-existing condition clause. Dr A goes off in February 2012 with stress and returns April 2012. Practice is paid roughly 4 weeks absence (assuming policy has a 4 week deferment

(Assuming the policy is kept at renewal)

Jan 2013 (condition not covered as occurrence happened 8 months ago)

Jan 2014 (condition not covered as occurrence happened 20 months ago)

Jan 2015 (condition not covered as occurrence happened 32 months ago)

Jan 2016 (assuming no further absence underwriter may cover condition)

That’s 4 years without cover assuming you remain with the same provider! FOUR years. Something also to consider here is that it is very hard sometimes to switch to another provider if you have a professional off with a recurring illness.

The moral of this story is simple. Check the timescale of your pre-existing condition clause. A reasonable time scale is a maximum 12 months. Anything else puts your practices finances at risk.

Regards

Chris Dixon BSc (Hones) Dip PFs

Director Approachable Finance Medical and GPlocuminsurance.com