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Labor

Corporate Planning

Continuity, Stability and Protection

To ensure proper, sensible & proactive detail is given to securing company operations, security and profitability against unforeseen circumstances. To ensure all legally required schemes are in place such as employee pension schemes and to give added value to staff remuneration packages.

How Staff and Company Benefit from Proper Corporate Planning

If you are not offering pensions, life assurance, disability cover, critical illness insurance and medical insurance to your staff then you are not maximizing potential added value a) for your employees and b) in your staffing capital investment.

An appropriate cost/benefit analysis of the various corporate planning options for your particular set of employees should be properly carried out. In many cases your employees will perceive the value of the benefit to be much higher than the actual cost of providing it, which makes such benefits a very useful tool in remuneration negotiations with individual staff or groups/unions.

The benefits not only accrue to your staff, but also assist in the efficient management of the company by providing cover for certain risks.

KEY PERSON COVER

As a company you insure your cars and your equipment against disaster like fire and flood and include compensation for loss of profits as well as asset replacement. But do you insure your company's cash flow against loss of key members of staff to death or disease?

Draw up a list of your Key People, who, very broadly, are those whose skills are such that no one else could step into the breach should they die suddenly of a heart attack or the like.

In most companies the Directors are Key People, as are the star salespeople, business drivers, and possibly certain technical staff.

Ask yourself what sort of damage their loss would entail. This can range from the catastrophic (in the event of the death of an owner director this can result in the calling in of all debts, bank overdrafts etc and subsequent failure of the firm) to the difficult (the death of the top salesperson may cause a new business famine and subsequent cash flow difficulties) to the merely expensively inconvenient (hiring a consultant locum at £500 a day for several months while a new person is recruited).

If you consider that you have a potential problem then you can insure against it using Key Man policies. These are not prohibitive in cost, although generally they will not count as a business expense.

DIRECTOR SHARE COVER

IMPORTANT NOTE TO MANAGING DIRECTORS: YOU SHOULD PROTECT YOUR COMPANY AND YOUR FAMILIES WITH DIRECTOR SHARE COVER.

In the event of a director of your company dying or suffering a critical illness it is imperative to protect both the company and the director's family. Simple and effective plans are available to provide complete peace of mind so that both the company and family survive such events.

INCOME REPLACEMENT PLANS / PERMANENT HEALTH INSURANCE

When you have to let a valued staff member go because of ill health it can be a very difficult decision; being almost as stressful for the manager, who feels that he is condemning a friend to State Benefits, as it is for the ill employee.

If however the staff member has got disability cover as part of their package everyone knows that their salary will be largely replaced by income from the insurer. This makes for much better management, working relationships and added value for your employees.

CRITICAL ILLNESS INSURANCE

If one of your staff gets a serious listed illness (but not necessarily immediately fatal listed illness e.g. cancer , heart attack, stroke) , then they get a lump sum payment (typically equal to two years salary). Again it helps to resolve the issues inherent in either paying unproductive staff or letting people down when you would really like to help them.

CORPORATE/EMPLOYEE PENSIONS AND LIFE INSURANCE

Death in Service Protection may have less direct benefit to the firm, but still offer effective ways of providing employee benefits. If as an employer you have five or more employees you may fall under the Stakeholder rules and need to set up pension schemes for those employees. That's the law. Gerard Associates can assess your business situation and provide advice and appropriate cover.

Company Seminars

Gerard Associates are to happy hold employee/employer seminars at the workplace in order to explain these areas. These meetings can provide excellent opportunity to both employer and employee when seeking clarification on these important areas.

Pensions

Provide financial security for retirement

STATE PENSIONS

A simple fund based contract where you (and perhaps your employer) put money in, and in due course you use the collected fund to buy a pension (see Annuities), and can also take up to 25% of the fund (excluding any portion of the fund in respect of being contracted out of State Earnings Related Pension scheme or Second State Pension) as Tax Free Cash.

“A” Day or Pension Simplification.

As from the 6 th April 2006 the rules governing pensions are being changed considerably. The age related limits previously used to govern contributions will be done away with. Each person will currently be able to contribute up to 100% of their salary or £215,000 per annum which ever is the greatest. These contributions will attract tax relief at the rate at which the individual pays tax. For those not paying tax the contribution will be limited to £3,600 gross per year.

The 6 th April 2006, known as “A” Day is also called Pension Simplification ( a mere 3,000 page document!). There are many other aspects which are changing at this point and it makes it all more necessary to seek Independent financial advice.

Don't forget pensions are now available for children!

You might be able to manage your own retirement strategy to some degree, any doubts call Gerard Associates 0117 966 2626

Options are now available for phased retirements, allowing a switch to part time employment before full retirement, or retirement at a later age.

STAKEHOLDER PENSION PLANS

This is a low cost pension contract that can be used by a wide range of people who wish to save up to £300 per month for their retirement.

Factors to consider:

 

  • Are you under 75?
  • Do you qualify under UK Residency rules? (Yes, unless you have recently arrived/departed the UK, in which case, seek advice).
  • Are you in an Occupational Scheme, (if yes, and you are earning more than £30,000 a year you may not be able to have a Stakeholder). If you are earning less than £30,000 per annum and in an occupational pension scheme you can not contribute more than £300 per month gross.
  • Are you, or have you ever been, a Controlling Director? (If so, seek advice, as you may not be able to have a Stakeholder. You may be/have been a Controlling Director if you hold/held shares in a company that you owned or controlled, albeit in conjunction with co-owners, friends or family).

 

It is worth noting that there are NO requirements relating to income or work up to premiums of £3,600 per annum.

Stakeholder Schemes are also popular with employers who want to offer their staff a simple pension scheme. Most employers are obliged to offer access to such a plan (although they don't need to contribute) unless they can meet certain exemption criteria.

OCCUPATIONAL PENSIONS

Who pays for company pensions and why?

Company pensions are pension schemes run by an employer for the benefit of their employees. Employees are generally referred to as members of the Scheme. Company Pensions are generally paid for by the employer, depositing money (contributions) into a fund. In many schemes the employee may also be required to contribute. It is normal for these contributions to be invested in a fund held separately to the assets of the company. This fund is then used to provide a pension for the employee when they come to retire. Different companies provide pension schemes for different reasons. Many companies have pension schemes to remain competitive in their industry and attract and retain the best employees. Other employers may have a paternalistic attitude towards their employees and wish to ensure they have a comfortable life after leaving the company. The reasons for providing pension schemes are not really important, for most people what matters is that they exist and they can be source of additional income in retirement.

Does an employer have to provide a pension scheme and at what age can I get my pension?

If a company has more than 5 employees then it must provide a pension scheme by law (the bare minimum is the provision of a Stakeholder pension). Great you might be thinking, pensions for almost everyone who works! However its not quite that wonderful. Whilst companies with more than 5 employees must provide a pension scheme this does not mean that they must put any money into it. Oh dear. Therefore whether your employer provides you with a pension scheme, into which they put money, is the option of the company. However that said most sizeable companies have some sort of scheme available.

In summary it is up to the company involved whether they choose to reward you with a pension scheme to which they contribute. Normal Retirement Age (NRA) is the age at which you can start to receive your pension by right. Different schemes have different NRA's but they must always be between 60 and 75 otherwise the Inland Revenue will not approve the scheme. This does not mean you cannot take your pension earlier or later but whether you can or not (and the terms on which this is available) will depend on each individual scheme. The earliest you can start to receive your pension is age 50 (unless you retire due to ill-health in which case you can start to receive your pension before 50), this is the law. However you can generally take your pension as late as your scheme will permit.

For further information call Gerard Associates 0117 966 2626

PERSONAL PENSIONS

A simple fund based contract where you (and perhaps your employer) put money in, and in due course you use the collected fund to buy a pension (see Annuities), and can also take up to 25% of the fund (excluding any portion of the fund in respect of being contracted out of State Earnings Related Pension scheme or Second State Pension) as Tax Free Cash.

The amount you can invest is governed by limits that relate to your age and your income or £3,600 per annum gross if greater. You normally get tax relief on the money you put into your pension fund.

Your fund value is dependent on investment returns, contributions, charges on the contract, term to retirement (and in some cases the financial strength of the pension company) but NOT the financial position of your employer. However, if the employer ceases contributing to the plan, this will obviously affect the final fund value.

Don't forget pensions are now available for children!

You might be able to manage your own retirement strategy to some degree, any doubts call Gerard Associates 0117 966 2626

Options are now available for phased retirements, allowing a switch to part time employment before full retirement, or retirement at a later age.

EXECUTIVE PENSIONS (EPP)

These are largely for senior staff and those who own and control their own company.

The details are very complex (and have been subject to repeated changes over the years), but in general it is a matter of the employee and employer putting in contributions to build up a fund that can be used to buy a pension. Normally the employer contributes the largest share of the investment.

Their main attraction is that they often allow larger contributions to be made than to the other types of pension available. Where employees have generous packages and are seeking to maximise pensions and minimise tax, an EPP can be a powerful tool.

ANNUITIES

An annuity is the name for the regular income you receive at retirement from your pension fund, built up over the life time of your pension plan. An annuity is simply an income purchased by capital usually saved though a pension fund. In this context, all pension fund payout's that are purchased by using the built up fund, are annuities.

Most pension plans will involve buying an annuity (regular payout scheme) at the point of completing your pension contributions. The main exceptions are Defined Benefit Schemes (which do not have to go the annuity route, though may choose to do so) and State Pensions, which are taxpayer funded on a year by year basis.

At its most basic, a pension annuity is simple - you hand over the money you have accrued through your pension payments in return for an income until you die.

In detail it is slightly more complex:

Open Market Option

As a pension fund holder you will pBillably be told that as well as buying an annuity from the company with whom you have saved your pension, you can take the fund to another company and buy it from them.

It may be in your interest to explore this option. It is highly likely that you will be able to get a much better pension by moving the fund.

(It is also worth noting that to some extent the annuity rate that a company can offer will depend upon many things outside of its control. Sometimes companies not normally noted for their annuity rates will offer good ones, sometimes those with good rates offer poor ones).

The rest of the options are largely driven by your personal circumstances, and possibly governed by scheme rules:

 

  • Would you like your income to be fixed, or rise each year (by a fixed percentage, or inflation etc)?
  • Are you in ill health?

 

To be blunt, do you suffer from a health or medical condition likely to kill you significantly before your time? If you are, then it may be possible to apply for an enhanced annuity to reflect the fact that your early death is likely.

If you have a partner, do you want the pension to continue after your death, until theirs, and if so, do you want the level to be maintained, or reduce?

 

  • Are you concerned about a sudden early death (say next week) and that if this happened, your pension fund would be lost to your beneficiaries.

 

If so, you can opt for a guarantee. Guarantees are normally for 5 or 10 years, and mean that if you die within that period then your beneficiaries won't lose out entirely. They would be paid as if you had continued to live. So if you have a 10 year guarantee and lived 6 years, they would get 4 years money. (The detail - whether by lump sum or income - will depend on the terms of the contract). For clarification call Gerard Associates 0117 966 2626

CHANGING YOUR EMPLOYER

If you change employers you need to make sure that your pension is protected

This can be a very complex area, but what you should do is collect the following information, and then seek professional advice.

Collect full details from your old employer as to your pension options

Collect full details from your new employer as to your pension options

Pensions and Divorce

This is an area of advice which requires both sensitivity and sense to bring about a satisfactory conclusion, Gerard Associates offer both in dealing with this type of settlement.

Income Protection

Provide money for you if you are unable to work due to illness etc.

This is a very important insurance - short of dying, the most devastating thing that can happen to most people during their working life is to become ill or disabled and be forced to live on State Benefits. Sorry if that sounds like it is being overly dramatic, but it is the truth.

Ask yourself what will happen if you become too ill to work? Will you be able to keep up the mortgage payments? What State Benefits will you get? How long will your savings last? How long will your employer pay you for?

Good news for employees - many employee benefit schemes include some Permanent Health Insurance as part of their benefits. This is often known as Sickness or Disability Pension, and if you provide us with a copy of your scheme booklet, we will be able to calculate how much cover this offers you.

If you do not have cover through your employer then you may need to purchase your own.

The cost depends upon a number of factors including your age, how safe or dangerous your employment is, your state of health and how long you are willing to wait once unable to work before any payment commences. Some people opt for policies that pay out after only four weeks of being unable to work, but others, seeking to cover only the most dire of emergencies, are willing to wait two years.

Most people choose a delay of either three, six or twelve months, having sufficient resources and / or employer support for the interim.

Where the deferred period is shorter the premiums could be significantly higher.

If cover is required Gerard Associates will be pleased to provide quotes that suit your needs as part of our overall advisory service

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