http://www.articletrader.com/ Articles at ArticleTrader en-us http://www.articletrader.com/finance/arranging-a-funeral.html http://www.articletrader.com/finance/arranging-a-funeral.html Mon, 26 Feb 2007 00:00:00 -0600
After you’ve registered the death you’ll receive a death certificate and a certificate authorising a funeral. You’ll need this for the funeral to go ahead.

Decide what you want

The first step is to decide what type of funeral you want. Find out whether your loved one made any arrangements or requests for their funeral before their death. Check their will if they made one, as they may have made special funeral requests in it. They may also have set up a funeral plan, in which they agree arrangements with a funeral director and make pre-payments towards the cost.

If nothing has been arranged in advance, decide for yourself how you would like the funeral to take place. It needn’t be formal, and neither does it have to be religious. You can choose anywhere you want for the service, not just a place of worship. You’ll also have to decide whether your loved one will be buried or cremated.

Get quotes

Make up a specific list of what you want for the funeral before you visit any funeral directors. This will help you to establish the full costs and compare like-for-like between quotes. Many funeral directors don’t declare every expense in their quotes and it can be difficult to get the full price before the funeral takes place, so taking a specific list of requirements will help to ensure you get an accurate quote. Prices can vary enormously from one director to another, so speak to a few.

If the funeral director is a member of the National Association of Funeral Directors, they will be obliged to provide what’s called a ‘basic funeral’ if asked to do so. This should allow for a reasonable funeral for your loved one. Watch out when you’re getting quotes though – the particulars of a basic funeral can differ between funeral directors.

Your list should include the following basic requirements: a funeral director, a coffin, a hearse, family cars, looking after the body, flowers, doctor’s fees for statutory certificates, the cremation or burial fee, a minister or someone to conduct the service, a gravedigger (burial), a plot (burial), a headstone (burial) and a casket/urn (cremation).

There may be several different fees that the funeral director will have to pay to third parties for the arrangement of the funeral – doctors, churches, crematoriums. These are known as disbursements. Check whether these are included in the price.

Don’t be afraid of scrutinising and questioning the costs with the funeral director. You’re entitled to know what you’re paying for and what is included in the price – and you want to make sure you get it right for your loved one.

Burial

Your loved one is entitled to be buried in the parish in which they lived or died, providing there’s a churchyard and enough space. They can also be buried in a different parish, but permission will be required from the local minister and the fee may be more expensive.

You’ll have to pay a fee for a plot and for a gravedigger, or if you have an existing family plot, there will be a fee for opening it up. Check with the church whether your loved one has already paid for a plot in the graveyard.

There are no stipulations as to what the coffin is made of or what you place in it with your loved one. Many environmentally conscious people are now requesting coffins made of cardboard rather than wood. You’re also free to put anything you want in the coffin, such as cherished items that they owned or photographs. You can also have them dressed in their own clothes.

Cremation

Extra authorisation is required before a cremation can take place. The cause of death must be confirmed. If the case has been referred to a coroner, they will issue authorisation without charge If the person died in hospital, only the doctor who last attended them needs to certify. Otherwise, two doctors will be required to see the body and sign an authorisation form, one of whom must be the doctor who last attended the person alive. A fee will be charged by both doctors for doing this. The next of kin must also complete an authorisation form.
Your funeral director will help to organise this.

You may choose to have both the service and the committal in the crematorium – most have a chapel. You can have the service anywhere though, and jus the committal at the crematorium.

Check whether the crematorium fee covers scattering of the ashes in the memorial garden. You may also want to pay for a plaque in memory of your loved one.

DIY funeral

You could opt to arrange and manage the funeral yourself, although it may turn out to be very hard work at such a stressful time. You’ll need to sort out the appropriate statutory forms yourself, buy a coffin and other materials, arrange the service and committal, and hire or find cars and a hearse or suitable vehicle for the coffin.

Paying for the funeral

Banks generally allow funds to be released from the account of the deceased to pay for funeral expenses, so check their account balance to establish whether there’s enough to cover it.

If there aren’t sufficient funds and you have no means of paying for it yourself, you could be eligible for support from the government’s Social Fund. To qualify you or your partner must be receiving means-tested benefits already, such as jobseeker’s allowance, income support, tax credits or council tax or housing benefit. (Your deceased loved one doesn’t have to have been claiming benefits though.)

You’ll also have to be deemed to be responsible for arranging the funeral in order to claim, and the dept will also take into consideration whether there are any other close relatives who can afford to pay.

If you do receive a grant, some or all of it may have to be repaid from the estate of the deceased when these funds are released.

There are other benefits available to people who have suffered bereavement. You may be entitled to a bereavement allowance for up to a year if you have been widowed or your civil partner has died. To qualify you must be under the state pension age, you must not be bringing up children and your partner must have paid National Insurance Contributions (NICs). Find out from your local Jobcentre Plus what you’re entitled to claim.

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Author: Benedict Rohan
Website: http://www.mortgagenation.co.uk
Benedict Rohan works as a freelance finance writer. Commercial Mortgage, Homeowner Loans, Remortgages.

Source: http://www.articletrader.com ]]> http://www.articletrader.com/finance/getting-a-mortgage-with-friends.html http://www.articletrader.com/finance/getting-a-mortgage-with-friends.html Tue, 06 Feb 2007 00:00:00 -0600
The terms of a joint ownership mortgage are no different from a standard mortgage. Regardless of the amount of deposit that each person pays or the salary that they are earning, each shares equal liability for making the mortgage repayments as far as the mortgage lender is concerned. So if one person stops making repayments, the others will have to cover their share to ensure that the full repayment amounts are paid. It’s up to the joint owners to decide how they will divide the mortgage repayments and ownership of the property between themselves.

Clearly, a legal agreement is the best way to ensure that everyone understands their rights and responsibilities. This isn’t a sign of mistrust, it’s simply a guarantee of protection for everyone. Although not compulsory when taking out a joint mortgage with friends, it’s certainly wise to do so. It won’t cost much to have one drafted up by a solicitor. In fact so many people are taking out mortgages in this way that some mortgage lenders provide specially tailored joint ownership mortgages that include the drafting of a legal agreement.

Although the mortgage calculation is based on the sum of everyone’s incomes combined, the mortgage lender doesn’t give people different sizes of share in the mortgage or property. How much each person contributes towards the repayments is up to the joint owners to decide. It doesn’t have to be directly related to each person’s salary. This should be set out in the written agreement.

It can become more complicated in circumstances where individuals have put down different deposit amounts. However, again it’s up to the joint owners to decide how they want to divide the shares in ownership and in the mortgage.

If there’s only a small difference in the amount of deposits paid by everyone, it can be evened out informally by those who paid a smaller deposit making separate repayments to those who paid a larger deposit until their contributions are balanced out.

Alternatively, you may decide that each person has their deposit amount returned to them upon the sale of the property before the remaining profit is shared equally among the joint owners. This tends to work best in circumstances where the deposit amounts are low.

A common agreement for joint owners who have paid different deposit amounts, particularly if they are a large sum, is for the share in the ownership of the property to be equal but for each person’s deposit amount to be taken into account when calculating the mortgage repayments, so that those who put down smaller deposits have a bigger share of the mortgage. When it comes to one owner leaving or the property being sold, each person’s share in the profit is determined by calculating their share of the current balance of the mortgage deducted from the current market value of their share. This is fairer than taking an equal share of the gain plus giving each person back their deposit amount, as those who have been paying more towards the mortgage as a result of their lower deposits will actually have been paying more towards the capital than those who paid lower monthly amounts because of their higher deposit.

There are several different ways in which a person’s circumstances may change, thereby affecting their share of the mortgage and property. The details of what will happen in such situations should be ironed out in the legal agreement.

If for any reason one of the joint owners wants to leave, there are various possible options:

* the person keeps their share of the mortgage and property and rents out their room
* the person sells their share to the remaining owners who can then rent out the room if they wish
* the share is sold to a third party in direct replacement of the person leaving
* the whole property is sold and all parties leave

Insurance should be taken out as part of the legal agreement to cover situations in which people are unable to continue paying their share of the mortgage for a period of time, for example because of illness, injury, redundancy or death. For illness or injury, insurance cover will normally make their repayments for them for up to a year, and if the person is still unable to make repayments after this, their share of the property will almost certainly have to be sold.

If one of the joint owners dies, life insurance will provide a lump sum to pay off the person’s share of the mortgage, and, depending on the legal agreement drawn up, their share of the property will become part of their estate. Writing a will is a sensible precaution for ensuring that the deceased’s estate is distributed according to their wishes.

There are other things you’ll need to agree such as whether third parties can live at the property, and if so, for how long. You’ll also need to decide how you’ll split the fees for buying and selling the property.

All of these issues should ideally be specified in the agreement, which is best drafted by a solicitor to ensure that it’s fair and legally binding and covers all eventualities. Joint ownership with friends should be an enjoyable experience and you wouldn’t want to lose out on friendships or money as a result of misunderstandings.


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Author: Benedict Rohan
Website: http://www.mortgagenation.co.uk
Benedict Rohan works as a freelance finance writer. Commercial Mortgage, Homeowner Loans, Remortgages.

Source: http://www.articletrader.com ]]> http://www.articletrader.com/finance/buying-goods-abroad-uk-customs.html http://www.articletrader.com/finance/buying-goods-abroad-uk-customs.html Wed, 06 Dec 2006 00:00:00 -0600
Buying goods abroad

Entering the UK from the European Union (EU): if you buy any goods on which tax was paid in another EU member country, you don’t have to pay any more tax in the UK. However, goods such as alcohol and tobacco must be for personal use only – i.e. for consumption by you or to be given as gifts. It is illegal to sell or take payment for these goods as they will then be considered to have been brought into the country for commercial purposes, and you could face up to seven years in prison if you are caught.

If a customs officer has reason to believe that you are bringing alcohol or tobacco into the UK for resale, you will be interviewed and expected to provide an explanation, and your goods may be seized (including the vehicle in which they are being transported) if they conclude that the goods are for commercial purposes. There are restrictions on how much tobacco you can bring into the UK from some of the new EU member countries who joined in 2004 without paying UK duty.

Entering the UK from non-EU countries: if you arrive in the UK with goods purchased in non-EU countries, there are limits to how much you’re allowed to bring into the country without having to pay UK duty. These are:

* 200 cigarettes or 250 grams of tobacco or 100 cigarillos or 50 cigars
* 60 cubic centilitres of perfume
* 250 cubic centilitres of eau de toilette
* 2 litres of still table wine
* 1 litre of spirits or strong liqueurs over 22% alcohol volume or 2 litres of fortified wine (e.g. sherry or port), sparkling wine or other liqueurs
* £145 worth of any other goods, including souvenirs and presents

There are also restrictions on how you bring the goods into the country. These are:

* You must travel with the goods.
* You must not sell the goods – they must be for personal use only.
* You must be over 17 to have the tobacco and alcohol allowances.
* If you go over the £145 limit for other goods, you’ll have to pay the duty for the whole value of the goods, not just the value over £145.
* You can only use your own personal allowance, i.e. you can’t share allowances in order to bring back higher value goods. If you do, you’ll have to pay duty on the total value of the goods.

If you have more than the allowance, you must declare your goods, otherwise you may face prosecution. Here’s how to declare goods at UK ports and airports:

Use the red channel if you have goods to declare or if you have commercial goods, or if you have more than the permitted personal allowance of tobacco from EU countries with tobacco restrictions.

Use the green channel if you’re entering from a non-EU country and don’t have any goods to declare.

Use the blue channel if you’re entering from an EU country and don’t have any tobacco that’s over the tobacco limit for that country.

Buying on the Internet

You’ll need to pay customs and VAT on goods purchased on the Internet if they are above a certain value. If the amount of duty is £7 and over, you’ll need to pay customs duty. If the value of the goods is £18 or over, you’ll also need to pay VAT.

You won’t need to pay UK customs duty if the goods were purchased in an EU country, but you’ll need to pay the VAT on the goods in that country if applicable.

For imports from non-EU countries, Her Majesty’s Revenue and Customs publishes a table of commodity codes for goods and the duty and tax that’s payable on them, as the rates vary from item to item. This table is known as the Tariff, and it’s updated monthly.

The person posting the goods to the UK will have to complete a customs declaration stating what the goods are, their value and whether they’re a gift or commercial item. Any duty that needs to be paid will be handled by the Post Office on delivery.

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Author: Benedict Rohan
Website: http://www.mortgagenation.co.uk
Benedict Rohan works as a freelance finance writer. Commercial Mortgage, Homeowner Loans, Remortgages.

Source: http://www.articletrader.com ]]> http://www.articletrader.com/finance/getting-to-grips-with-isas.html http://www.articletrader.com/finance/getting-to-grips-with-isas.html Fri, 01 Dec 2006 00:00:00 -0600
This guide is for information purposes only and is not intended as financial advice. For guidance on managing your personal finances, it is recommended that you speak to a qualified independent financial advisor.

Savings limit

You can invest up to £7,000 per financial year (April to March) in various combinations of ISAs without having to pay tax on either the interest gained from your savings or any capital growth or dividends made from your stocks and shares. If you mistakenly end up opening more ISAs than your entitlement allows, you’ll end up being taxed on your income from them.

Types of investments

There are three ways in which you can invest your money in an ISA – cash savings, stocks and shares and life assurance.

Maxi ISA

This type of ISA allows you to invest up to the full ISA threshold – £7,000. You can either invest the whole £7,000 in stocks and shares and life assurance or up to £3,000 in cash and the rest in stocks and shares and life assurance. All investments in a maxi ISA must be with the same company.

Mini ISA

Alternatively, you can have up to two mini ISAs in one year, one for cash and one for stocks and shares, and both of these can invest in life assurance. The limit for the mini cash ISA is £3,000 and the maximum that can be invested in stocks and shares is £4,000. You don’t have to have all your mini ISAs with the same provider.

Providers

There are lots of different providers of ISAs, all of which must be approved by Her Majesty’s Revenue and Customs (HMRC). These include also supermarkets, retailers, fund managers, financial advisors and the National Savings and Investments Bank (formerly the Post Office Savings Bank) as well as high street banks and buildings societies.

Shop around

Not all providers offer the same interest rates and stocks and shares options, so do your homework before you decide which provider to go with. Also look out for charges for managing funds with stocks and shares ISAs – these can vary signficantly.

Transferring ISAs

ISAs are very flexible – you can take your money out at any time (subject to a notice period with some accounts) and you can easily transfer an ISA from one provider to another, as long as you transfer to the same type of ISA – you can’t transfer funds from a cash ISA with one provider to a stocks and shares ISA with a different provider. You must also transfer the funds directly from one ISA to another (i.e. you can’t close down one ISA, withdraw the funds and then deposit them in a different ISA). Check with your provider whether there are any charges for transferring your ISA.

Who can get an ISA?

Anyone over the age of 16 can take out a cash ISA and anyone over 18 can take out a stocks and shares ISA, as long as they are resident in the United Kingdom. Exceptions are made for civil servants and members of the armed forces who live overseas, as well as their spouses or partners. ISAs can only be taken out in your own name – it’s not possible to have a joint ISA.

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Author: Benedict Rohan
Website: http://www.mortgagenation.co.uk
Benedict Rohan works as a freelance finance writer. Commercial Mortgage, Homeowner Loans, Remortgages

Source: http://www.articletrader.com ]]> http://www.articletrader.com/finance/gas-guzzlers-the-cost-of-running-a-car-today.html http://www.articletrader.com/finance/gas-guzzlers-the-cost-of-running-a-car-today.html Fri, 01 Dec 2006 00:00:00 -0600
To keep or use your vehicle on any public road, you must pay vehicle licence duty (also known as road tax, car tax or vehicle excise duty) and display a tax disc on your car windscreen to show that you have paid the duty. Tax discs aren’t transferable so you can’t change them from one car to another – you’ll need one for each car. The cost of the vehicle licence duty is graded depending on the size, purpose, engine capacity, fuel type and CO2 emissions. So the more fuel-efficient and environmentally-friendly your car is, the less you’ll pay to tax it. Small petrol/electric hybrid cars such as the Honda Insight pay no duty, while the average small car will cost around £100 and the biggest gas guzzler up to £210.

Car insurance is another legal requirement. You must have at least third party cover to cover the costs of repairing other vehicles should you have an accident in which you are deemed to be at fault.

Policies normally run for a period of one year, although some providers accept payments in monthly instalments rather than one annual fee. Premiums are higher than ever now, but despite this people can be lazy about arranging their insurance, just renewing with the same insurer when the renewal quote comes through. It pays to shop around, though, as insurance companies don’t tend to reward their long-term customers. Instead, most providers offer attractive deals to new customers, so it’s worth getting lots of quotes. Most major insurers now have online quotation forms, so it’s quick and easy to get a price. Remember to examine the exact terms and conditions of each policy, though. Some quotes that seem cheap may not include facilities that others do, such as legal assistance and courtesy car provision should your car need repaired. Also check the excess amount that you’ll need to pay in the event of a claim – cheaper policies tend to have larger excesses.

Insurance companies calculate premiums based on the perceived degree of risk of the person insured and likelihood of a claim – young, male drivers who have only recently passed their test are regarded the highest risk. New drivers can help to reduce their premiums by taking the Pass Plus course offered by the British School of Motoring. It provides six hours of advanced training, including motorway skills and you’ll get a certificate for completing it, which is recognised by many insurance companies. The course costs £100, but the savings on premiums can be two or three times this.

The heightened threat of terrorism, increasing demand for fuel from emerging economies such as China, and high rates of fuel duty levied by the government, have seen UK petrol prices rocket phenomenally over recent years. However, until viable alternative fuels become a reality, we’ll have to pay the prices at the pump. Think about how you could cut down on the fuel you use, though. For a start, a smaller car will give you more miles per gallon. Try to share journeys with other people, or just walk or cycle if it’s not that far. Have your vehicle serviced and the tyre pressure checked regularly – keeping your car running to the best of its ability will reduce fuel consumption. Don’t carry unnecessary weight in your car when you don’t need to. For example, remove roof racks when not in use.

To keep your car safe and legal on the roads, you’ll need to obtain an MOT certificate every year if your car is three or more years old. This test ensures that your car meets the minimum government environmental and road safety standards. It currently costs £44 for private domestic vehicles, but if you need any repairs or adjustments made to your car to pass the test, it will of course cost you more. It’s wise to have a regular service as well as MOT to keep your car running effectively. Recommended service intervals are always given by the car manufacturer. Service costs between garages can vary considerably, particularly between franchised dealers and independent garages, with franchised dealers inevitably the most expensive. Watch out for labour costs in particular, which can range from £25 to £115 per hour. Following action by the Office of Fair Trading in 2004, vehicles under warranty are no longer required to be serviced at a franchised dealer of the manufacturer, so even if your car is new you can have it serviced at a cheaper independent garage.

Purchasing a vehicle is never an investment. As soon as you drive a new car off the forecourt its value starts to plummet. Depreciation is one of the hidden costs of running a car, but it is a very significant one. Value decreases quickly as a car ages, and it costs a lot to maintain, so you’ll never make your money back on it when you sell it. Buying a second-hand car is a much cheaper option in terms of depreciation.

On top of all of these costs, motorists are bombarded with car parking charges and road tolls. It’s just about impossible to find free parking in large towns and cities these days – and some cities charge a congestion fee just for driving in the centre of town. Many key bridges are toll-paying and the UK now has its first toll motorway, a spur of the M6. Remember, if it’s all too expensive, there’s always the bus or train!

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Author: Benedict Rohan
Website: http://www.mortgagenation.co.uk
Benedict Rohan works as a freelance finance writer. Commercial Mortgage, Homeowner Loans, Remortgages

Source: http://www.articletrader.com ]]> http://www.articletrader.com/finance/mortgage/the-importance-of-making-a-will.html http://www.articletrader.com/finance/mortgage/the-importance-of-making-a-will.html Sat, 25 Nov 2006 00:00:00 -0600
It’s not something that anyone likes to think about, but deciding what happens to your estate when you die is crucially important for ensuring that your loved ones are looked after when you’re gone and that your assets are distributed as you would have wished.

Many people think that wills are only necessary for people with a great deal of wealth, but this isn’t the case. There are certain laws governing how a person’s estate is divided if they die ‘intestate’ (i.e. without a will), which might not be what you would expect or intend. For example, if you’re not married or in a civil partnership, even if you co-habit with your partner, they will not be entitled to inherit anything from you unless you specifically mention them in your will. Even if you are married, without children, your spouse will not inherit your entire estate – other living relatives such as your parents and siblings will be entitled to a share. Also, if your circumstances change, for example if you get married, divorced or remarried or have children, this could make your estate more complicated to settle. Another important point to bear in mind is that if you don’t have a will, you won’t have a named executor to carry out the administration of your estate and the responsibility will fall upon your beneficiaries, whom you may deem unsuitable to handle your affairs.

Making a will has other advantages too – planning your estate and who will inherit may help you to minimize the impact of the inheritance tax laws.

To make a will, you must be 18 years of age or older. You must be considered to be of sound mind and it should be written without pressure from any other party. A will must be recorded in writing, and it needs to be signed by yourself in the presence of two witnesses, who must also sign. Beneficiaries of the will and married partners of beneficiaries cannot act as witnesses. If they do, the will won’t be invalidated, but their inheritance will be. The completed and signed will can be kept anywhere you want – at home, at your bank, at your solicitor’s office, at a Probate Sub-registry, a District Registry or the Family Division Registry of the High Court.

The big question for many people is whether it’s necessary to employ a solicitor to set up a will. The answer is no, but it is certainly recommended, particularly if your estate and personal circumstances are rather complex. It’s also easy to make seemingly simple mistakes which could end up having significant consequences. Common errors are not understanding what has to be done to make a will legally valid, changing the will without having it signed by witnesses, failing to make alterations in the event of a change in personal circumstances, forgetting about parts of your estate, or not taking into account that the beneficiary might die before inheriting.

Solicitor charges for setting up a will can vary between solicitors and will also depend on how complex your estate is. If you’re a member of a trade union, your membership may entitle you to a free will-writing service or free legal advice. You can bring down costs by considering in advance what your assets are and to whom you would like to leave them – whether family, friends or charity. This will include property, possessions, bank accounts, insurance policies, pensions and shares. Also think about who you want to appoint as executor of your estate and who you want to look after your children should you die before they reach the age of 18.

You should certainly consider using a solicitor if you have complicated personal circumstances, for example if you live with someone who isn’t your spouse or civil partner, if you have a dependant who is unable to look after themselves, if you have a business or own property abroad, if you don’t live in the UK or aren’t a UK citizen, or if you have lots of family members who may make claims on your estate, such as ex-spouses or children from previous marriages.

If you don’t want to use a solicitor, it’s possible to purchase ‘DIY’ will kits from many high street stationers and bookshops or online providers, which will provide basic guidance.

Remember to make amendments your will any time you have a change in circumstances such as marriage, remarriage, divorce, civil partnership or the birth or adoption of children. You’ll need to be careful in how you amend your will to ensure that it remains valid. It’s not possible to write alterations onto an existing will. Instead you must either write what’s known as a ‘codicil’ or draw up a new will entirely. A codicil is like an addendum to your will. It doesn’t replace the original will, but makes alterations to one or more of the sections. Only the person who created the original will can make a codicil, and it must be signed and witnessed in the same way as the original will (although not necessarily by the same witnesses). It’s only suitable for making small and uncomplicated changes such as increasing or decreasing the amount of money left to a beneficiary, adding a new beneficiary or changing the executor. You can add as many codicils as you want to your will, but if you have lots of amendments or complex changes it’s best to start afresh with a new will altogether. When you draw up your new will, you should insert a clause at the beginning to explain that this new will revokes all previous wills and codicils. Your old will is no longer valid after you do this (and have your new will signed and witnessed), and you should therefore destroy it. You must destroy it yourself too, or have it destroyed in your presence – otherwise it may still be considered valid.

Your will may be challenged if a person feels that it hasn’t left them with adequate provision or they don’t believe it to be valid – for example, if it hasn’t been drawn up in line with the legal requirements outline above.

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Author: Benedict Rohan
Website: http://www.mortgagenation.co.uk

Benedict Rohan works as a freelance finance writer. href="http://www.mortgagenation.co.uk/">Commercial Mortgage, Homeowner Loans, Remortgages.

Source: http://www.articletrader.com ]]> http://www.articletrader.com/finance/pensions-guide-private-pensions.html http://www.articletrader.com/finance/pensions-guide-private-pensions.html Sat, 18 Nov 2006 00:00:00 -0600
This article is the second of two guides examining the fundamentals of pensions. The first guide focuses on state pension provision, while this one outlines some of the possibilities for making personal pension arrangements. They are intended for information only and do not constitute financial advice. It is recommended that you speak to a financial advisor for professional advice on planning your finances for retirement.

Saving for the future

There are lots of ways in which you can save for the future – savings accounts, stocks and shares and property investment, for example. However, all of these are subject to tax. Pension schemes are much more tax-efficient as tax relief is given on contributions made and the income they provide during retirement is tax-free. This is why pensions are a common way of saving for retirement.

There are two main types of personal pensions – final salary and money purchase. The first can only be provided through occupational schemes, but the second can be purchased privately on an individual basis.

Final salary

Final salary schemes, also known as defined benefit schemes, provide a guaranteed income based on a percentage of salary earned during your final year of work as well as length of service with the company. It’s possible to retire on up to two thirds of your final salary.

As it guarantees to provide a certain level of income, it’s often considered to be the best type of pension scheme available. However, there has been a decline in the number of employers offering final salary schemes in the last few years because of the expense of maintaining them. Falls in the stock market have seen many pension investment funds drop drastically in value, meaning that the employer must make up the difference in order to provide the guaranteed income to the scheme’s members. Another expense for employers with final salary schemes is the 10% tax levied on dividends, a measure introduced by the government in 1997, which again can have a detrimental impact on the size of pension funds.

Money purchase

With money purchase schemes, also know as ‘defined contribution’ plans, members make payments into a fund which is then invested into the stock market. On retirement, the accumulated funds are used to buy what’s called an annuity, which provides a regular retirement income. The amount you’ll receive in retirement isn’t guaranteed – it depends on how well the stock market has performed and on annuity rates at the time that you take out your annuity. Whereas final salary pensions put the burden of risk on the employer, who must make up the amount to a guaranteed level, it’s the member who’s responsible for the risk of a shortfall in money purchase schemes. Members may therefore need to save more cash independently to ensure they’ll have a comfortable retirement.

You’ll have some flexibility to choose what funds your money is invested in, and your decisions will depend on your attitude to risk. Higher risk investments can provide much greater potential returns, but at the same time can also make the biggest losses. ‘Safer’ investments will reduce the risk of losses but will not be likely to yield as big returns as higher risk investments.

Annuities

An annuity is a fixed, regular amount of money paid to someone, usually for the rest of their life, which is purchased using a lump sum from a pension fund, for example. It’s invested in the stock market, usually in funds considered to be safe. Annuity rates have plummeted in the last decade, meaning that many people are now expecting lower annuity incomes and are having to change their retirement plans. However, there are various different options when it comes to annuities. Members aren’t obliged to take out the annuity offered by their own scheme – they can use their accumulated pension funds to buy an annuity from any annuity provider on the open market, where they may be able to get a better rate. It’s also possible to take up to 25% of the pension fund as a tax-free cash lump sum, leaving the other 75% to purchase an annuity. A third option is to take out a short-term annuity of up to five years to keep your pension invested for a little longer in the hope that it will increase in value to allow you to purchase a better lifetime annuity further down the line. Another way of delaying taking out an annuity is to receive an income directly from your pension fund, keeping it invested in the hope of gaining higher returns to sustain the income received. However, the value of the funds could fall just as easily as they could rise, which may leave you worse off. This option is known as an ‘unsecured pension using income withdrawal’. Finally, it’s possible not to purchase an annuity at all and instead receive an income directly from your pension fund from the age of 75 with an ‘alternative secured pension’. Before 2006 it was a legal requirement to purchase an annuity from pension funds by the age of 75, but the law changed to allow people over 75 to receive this type of income instead, although the total amount of income that can be drawn down from it is 70% of a lifetime annuity. It’s intended for people who are opposed to purchasing annuities on ethical grounds as a result of their religious beliefs.

Stakeholder schemes

Stakeholder pensions were set up by the government in 2001 with the aim of facilitating access to personal pensions for people whose employers don’t run occupational schemes. As with money purchase plans, stakeholder pensions invest in the stock market, bonds and cash savings accounts and accumulate funds which are used to purchase an annuity upon retirement. They’re designed to be easy to understand, flexible and lower cost than other pension plans. The maximum charge that administrators will be able to charge each year for managing the funds is 1% of the value of the fund, and they cannot charge penalties if members wish to transfer cash in or out or stop contributing. However, there’s a limit to the amount that can be invested, so they’re designed for people on low to middle incomes rather than high earners.

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Author: Benedict Rohan
Website: http://www.mortgagenation.co.uk
Benedict Rohan works as a freelance finance writer. Commercial Mortgage, Homeowner Loans, Remortgages

Source: http://www.articletrader.com ]]> http://www.articletrader.com/finance/pensions-guide-state-pensions.html http://www.articletrader.com/finance/pensions-guide-state-pensions.html Sat, 18 Nov 2006 00:00:00 -0600
Pensions are becoming more and more important as people now live longer into their retirement. Lifestyles have also changed – people often take out mortgages later in life than they used to, meaning that they may still have a mortgage to repay when they stop working. And as people are experiencing better health and longer retirements, they want to have a reasonable disposable income in order to enjoy more leisure activities in their later years.

This is the first of two guides outlining the fundamentals of pensions. It’ll help you understand more about state pensions and how they are calculated. The second guide focuses on private pension schemes. These articles do not constitute financial advice and should only be used as an introductory informational guide to pensions. For advice on how to plan your finances for your future, seek professional advice from an independent financial advisor.

Definition

First, back to basics – what is a pension? It’s a regular source of tax-free income for you to live on when you retire. As contributions towards your pension fund during your working life also receive tax relief, it’s a more tax-efficient than other methods of saving.

The government department responsible for managing and administering state pensions and other pensions related benefits is The Pension Service, which is part of the Department of Work and Pensions.

State pension

The government provides a state pension, which can be claimed by men over the age of 65 and women over the age of 60 (although this will increase to 65 in line with the male pension age by 2020).

Not everyone qualifies for a state pension, and even those who do will receive different incomes depending on their working history. Entitlement is calculated according to the number of national insurance contributions (NICs) you (or your partner/spouse) have paid, which are converted into ‘qualifying years’. You’ll need to have worked and paid contributions for around 90% of your adult working life in order to receive the full state pension. If you’ve been out of work for long periods in order to bring up a family or look after someone, you’ll be compensated for missing NICs through ‘Home Responsibilities Protection’. If you’ve been out of work for other reasons and have been claiming benefits such as jobseeker’s allowance, or income support, the government will have paid your NICs on your behalf for the period(s) in which you claimed benefit. The minimum you need to get the basic state pension is 25% of the qualifying years. If you have anywhere between the minimum and maximum amount of qualifying years, the amount you receive in your state pension will be adjusted in relation to how many qualifying years you have, so the more you have, the better. Those who have less than 25% of qualifying years won’t be able to claim any state pension at all, although there are other government pension benefits to assist those on low incomes in retirement, such as pension credits or the Over 80 pension.

Additional state pension schemes

In addition to the basic state pension, the government has a top-up scheme to enable people to increase the amount of pension income they receive.

SERPS (State Earnings-Related Pension Scheme)

Until April 2002, SERPS was the government’s second pension scheme, which allowed anyone earning more than £75 per week to make additional NICs. The level of NICs paid was earnings-related. However, the government deemed SERPS unfair on people with low incomes and those with big gaps in their employment history, so it was crapped and replaced with the Second State Pension in 2002 with the aim of allowing everyone to save more for their retirement.

SERPS gave the option of ‘contracting out’, which could be done for one of two reasons: in order not to pay the additional NICs, or to put the additional NICs towards a private pension fund.

Second State Pension

People who were paying into SERPS will now be paying into the second state pension and may therefore receive their additional state pension from two different sources when they retire.

The Second State Pension is still linked to earnings. However, it’s calculated in a way that provides better support to those on low incomes, or people who don’t have constant work because of illness or disability. In these cases, the government tops up their credits to a flat rate of £12,100, so they will receive NICs as if they had earned an annual salary up to this amount.

As with SERPS, it’s possible to ‘contract out’ of the Second State Pension, either to stop paying the additional NICs or to put them towards your own pension fund.

Finding out how much your state benefits are worth

To help you plan your savings towards your retirement, the government offers state pension forecasts to let you see how much you’ll be likely to receive as retirement income. Visit the Government Pensions Service website for more information (www.thepensionservice.gov.uk).

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Author: Benedict Rohan
Website: http://www.mortgagenation.co.uk
Benedict Rohan works as a freelance finance writer. Commercial Mortgage, Homeowner Loans, Remortgages

Source: http://www.articletrader.com ]]> http://www.articletrader.com/finance/government-benefits-for-the-unemployed.html http://www.articletrader.com/finance/government-benefits-for-the-unemployed.html Wed, 15 Nov 2006 00:00:00 -0600
Jobseeker’s allowance – unemployed people who are of working age and are actively looking for work, or people who work less than 16 hours a week, can claim jobseeker’s allowance. It will be calculated either on your income or on your national insurance contributions, according to your circumstances, and the amount that you will receive will be a flat weekly rate. £57 is the current rate for single adults, although you’ll receive less if you have savings of over £6,000. You won’t be eligible to receive any jobseeker’s allowance if you’ve got more than £16,000 of savings. You can apply by either going to your local job centre or by completing an online application. Once your application has been received, you’ll have a meeting with an adviser. They will explain the allowance to you and together you’ll draw up a jobseeker’s agreement, which will outline how you’ll go about finding a job and what support you’ll receive in order to do so. This agreement will be reviewed regularly, and you’ll need to return to the job centre every two weeks to confirm your claim for jobseeker’s allowance. Those claiming jobseeker’s allowance are eligible for free NHS dentistry and prescriptions, and may qualify to receive assistance with housing and council tax.

Job grant – if you’ve been claiming jobseeker’s allowance, income support or incapacity benefit for at least 26 weeks and you’re about to start a full-time job (at least 16 hours per week) that will last five weeks or more, you may be eligible to receive a one-off tax-free payment known as a job grant. You may also qualify if your benefits stop because you have a partner who has recently started working over 24 hours a week. If you and your partner have no children, you’ll receive £100, or if you have a family you’ll get £250. The grant is tax-free and isn’t classed as income so it won’t affect any other benefits. You don’t need to apply for it – you should automatically receive it after telling your jobcentre plus that you’ve got a job.


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Author: Benedict Rohan
Website: http://www.mortgagenation.co.uk
Benedict Rohan works as a freelance finance writer. Commercial Mortgage, Homeowner Loans, Remortgages

Source: http://www.articletrader.com ]]> http://www.articletrader.com/finance/government-benefits-for-those-on-low-incomes.html http://www.articletrader.com/finance/government-benefits-for-those-on-low-incomes.html Wed, 15 Nov 2006 00:00:00 -0600
Income support – this is a means-based allowance for those who are unable to work full time and have a low income, or who can only work less than 16 hours per week. It can be very helpful for people who have children or who look after an elderly or disabled person, or who are ill or disabled. Again, you won’t qualify if you have more than £16,000 of savings. There are lots of different factors that will be taken into consideration in order to determine your eligibility for income support, including your age, your income, your savings, your dependants, whether you have a partner, your partner’s income, your partner’s savings, and whether you’re disabled or caring for someone. People on income support also qualify for free NHS dentistry and prescriptions, as well as housing and council tax benefit. You can claim online or in person at a jobcentre plus, and as part of the application process you’ll have an interview with a personal adviser who’ll review your financial situation with you.

Working tax credits – again designed to support working families or individuals on a low income, this benefit is suitable for people who work at least 16 hours per week and have dependants to support, or people who have no children but who work over 30 hours per week in a low-paid job. Some of the factors that will be taken into consideration when calculating how much you’ll receive in working tax credits are your income, the number of hours you work, whether you live with a partner, the number of children you have, how much you spend on childcare, whether you’re entitled to any other benefits, or whether you’re disabled. It’s managed by Her Majesty’s Revenue and Customs (HMRC), who’ll pay it directly into your bank account. To claim, either phone your nearest HMRC office or pop into your local jobcentre plus.

Council tax benefit – you’ll be eligible to receive council tax benefit (up to 100% reduction in your council tax bill) if you’re on a low income and have less than £16,000 in savings. If you don’t qualify to receive it, you may still be eligible to receive a ‘second adult rebate’, giving money off your council tax bill in circumstances where you share your home with another adult who isn’t your partner and who doesn’t pay council tax or is on a low income. If you claim income support or jobseeker’s allowance, you’ll be given a form for claiming council tax benefit.

Housing benefit – housing benefit, paid by local councils, assists those who’re unable to pay their rent. You can claim this whether you’re a council tenant or live in a privately rented property. You’ll only qualify if you’re on a low income with less than £16,000 of savings, aren’t a full-time student and don’t live with a close relative. If you’re living in a council property you’ll receive housing benefit directly into your rent account from your local council. If you’re in privately rented premises, the council will investigate whether the rent amount asked for the property is acceptable for its size and location and for the size of your family in order to determine your eligibility. If you do qualify, you’ll either receive a cheque or direct payment into your bank account, or your landlord will be paid directly.


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Author: Benedict Rohan
Website: http://www.mortgagenation.co.uk
Benedict Rohan works as a freelance finance writer. Commercial Mortgage, Homeowner Loans, Remortgages

Source: http://www.articletrader.com ]]>