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Add a little certainty to your future

06 October 2014

With a little bit of thinking - and some expert guidance - you can secure your financial future

The harsh and sad fact is that we are very likely to be close to someone who gets a serious illness. Take cancer, for instance. According to Macmillan, the cancer charity, one in every three of us will be diagnosed with cancer and one-third will be below the age of 651.

What’s more, every year 275,000 people suffer a heart attack, of which some 155,000 of those people will survive2.

Critical Illness cover

Taking out a critical illness policy can offer some financial reassurance.  These policies promise to pay out a lump sum not when you die but on diagnosis of a specified condition, for example cancer, a stroke, heart attack, kidney failure or multiple sclerosis.

Critical illness cover can be more complex than some other financial products. Consumers often fail to understand what they are covered for and, more importantly, what is not covered, so it pays to get expert help before signing on the dotted line.

Sickness benefits can vary substantially, but if you are off work because of sickness your long term incapacity benefit will be £104.10 a week, based on 2014/15 levels3.

Income Insurance

An income protection policy is worth serious consideration as it is designed to pay out a monthly sum of money until you die, or more optimistically you reach retirement, return to work or recover from the illness. For example, a 20 year old taking a plan out with a retirement age of 65, who has an accident just after the plan is issued and can never work again, would get a monthly payout for 45 years.  Therefore a plan with an income benefit of say £1,000 per month could potentially pay out a total of £540,000. 

Whole of Life cover

It is not just younger people that need to consider all eventualities. By the time your fiftieth birthday has been and gone, there is every chance that your children will have flown the nest and that your mortgage is, all but, paid off. But that doesn’t mean you should stop thinking about insurance and protecting your family, wealth and health.

You will have seen whole of life assurance for older people advertised on day-time television or have received mail shots through your letterbox from an insurer selling over-50s plans to cover funeral costs. However, whole of life assurance policies do more than simply cover funeral costs. They can, amongst other things, also help against a potential inheritance tax (IHT) bill.

Paying Inheritance Tax

Inheritance tax is currently paid on the excess of an estate worth more than £325,000 or over £650,000 if you are married or have a civil partner, where the full benefit has been passed to the surviving spouse. A common way to prepare for IHT is to take out a whole of life assurance policy in trust, which provides a sum of money that can be used to pay the IHT bill after you die. The proceeds of the policy do not form part of your estate, provided it is in a trust. So if your estate is expected to be liable for an IHT bill of, say £30,000, you take out a policy for that sum to cover it.

Many people think of financial planning as creating wealth. It is, but it is also about protecting what you already have.

The levels and bases of taxation and reliefs from taxation can change at any time and are dependent on individual circumstances.

Trusts are not regulated by the Financial Conduct Authority or the Prudential Regulation Authority.

1 Source: October 2012

2 Source: August 2012

3 Source:, "Proposed benefit and pension rates 2014 to 2015"

Some of the products and investment structures documented within this article will not be available to our clients in Asia. For information on the funds that are available please get in touch.


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