Wealth Archives

Pension planning during times of uncertainty

Posted on 9 January 202328 March 2025 by Sophie Soraf

There have been various difficulties in recent years, affecting the UK economy that have had an impact on pension savers. These include Brexit, the COVID-19 pandemic, the conflict between Russia and Ukraine as well as political instability in Westminster. These events have caused turbulence in the markets, leading to a decline in share prices and other investments. If you have a workplace pension or a personal pension you may have noticed that its value has decreased as a result. While this can be concerning, it is important to remember that it is a temporary setback and there are ways to weather the storm.

What should I do about my pension if I see the value dropping?

Even though these are unprecedented times, as an investor, it’s useful to put any short-term volatility into historical context, to get the bigger picture, rather than focusing too intently on short-term events and market fluctuations.

Market analysts and investors aren’t infallible, they become nervous in uncertain times. This is because the loss of trade and tourism can pose a threat to companies of any size. So, it’s little wonder that stock markets have fallen and you are likely to have seen a drop in the value of your pension pot over the course of the last few years.

However, it’s worth remembering that the recent falls have come after some very strong rises in recent years. Also, your pension pot is unlikely to be invested solely in equities, so a 5% fall in the market does not necessarily equate to a 5% fall in the total value of your pension fund. In fact, the typical pension pot will contain a broad range of assets, which have been identified to fit in line with your attitude to risk, personal objectives and time frames.

A typical pension fund contains around 60%-65% in shares, with the rest in government and corporate bonds, property and cash. In contrast to equities, government bonds have actually increased in value during the crisis.

Will my pension pot ever recover?

Investment requires a disciplined approach and a degree of holding your nerve if markets fall. Experienced long-term investors know that the worst investment strategy you can adopt is to jump in and out of the stock market, to panic when prices fall and to sell investments at the bottom of the market.

The importance of keeping to your long-term plan is evident by studying the performance of the FTSE 100 over the last 20 years or so. Back in the autumn of 1998, the FTSE 100 fell by 1,000 points, amidst an environment of high-interest rates and other threats to UK economic growth. However, it had almost fully recovered by the end of 1998 and the index soared close to 7,000 in 1999. A global slowdown brought it back down to around 3,600 in the spring of 2003, before taking another five years to climb back to around 6,500. Then, the global financial crisis happened and the index was back at 3,500 in March 2009. After a long haul back, the index was at over 7,000 in January 2020 before the pandemic affected global markets.

Over the last 20 years, despite a variety of market shocks and rebounds, the index still has a long-term growth trend. It’s important to remember that some market volatility is inevitable. Markets will always move up and down, but it’s important to stick to your long-term plan.

Is now a good time to top up my pension?

Providing you are investing for the long term, you may wish to consider investing more into your pension pot. Even a small increase in contributions could make a difference to your final pension pot if it benefits from an upturn in the market and makes up for recent losses.

Remember that whatever type of pension plan you hold, you get tax relief at the highest rate of Income Tax you pay, on all contributions you make, subject to annual and lifetime allowances. This effectively means that some of your earnings which would have gone to the Government as tax are diverted to boost your pension pot instead.

You receive ‘relief at source’ if you pay money into your personal pension yourself or if your workplace pension contributions are taken directly from your pay packet. In both circumstances, you automatically receive 20% tax back from the Government in the form of an additional deposit into your pension pot. So, for instance, if you’re a basic-rate taxpayer investing £800 of your take-home pay into your pension, the tax relief would amount to £200. Effectively the taxman tops up your £800 contribution to £1,000.

How do I make sure my pension is protected?

As well as taking a long-term view of your pension, regular reviews are essential to ensure you remain on track with your well-defined plan, in accordance with your objectives and attitude to risk. If there have been any changes in your objectives or circumstances, it is particularly important to review and make any adjustments where needed.

When investing, you have to decide how much risk is right for you. Successfully achieving your long-term goals requires a balance between risk and reward, so you can construct a diversified portfolio with the potential to improve returns that matches your elected level of risk. While a diversified portfolio should incorporate strategies to help reduce risk, it cannot be eliminated altogether. The process of building such a portfolio is very difficult to achieve without professional advice.

Can I get advice about my pension?

In these uncertain times, more than ever, it’s important to take professional independent financial advice, from someone who will help you to make the right financial decisions and identify and meet your goals and aspirations. Research shows that those who take advice are likely to accumulate more wealth, supported by increased savings and investments in equities. Also, those in retirement are likely to have more income, particularly at older ages.

Tees Wealth Management listed in Citywire New Model Adviser Top 100

Posted on 9 January 202330 March 2025 by Sarah O'Sullivan

We are proud to announce that our wealth team at Tees has been recognised by Citywire’s New Model Adviser as a Top 100 financial planning firm in 2022.

New Model Adviser is a prominent industry publication and its Top 100 honours the best of the financial planning community, recognising advice firms across the UK who are leading the way in the industry and providing exceptional Client service. As one of the top 100 financial planning firms in the UK, we have been widely praised by our clients, and through our team of experienced professional advisers, we help our clients to realise their financial goals, objectives and dreams, through our bespoke financial planning service.

James Appleby, commented “We are delighted to be named in the New Model Adviser Top 100. This acknowledgment recognises Tees’ commitment to our clients and the communities in which we operate, as well as the high level of professionalism, dedication and client focus demonstrated by the advice team.“

New academy at Tees Financial launches with first two participants

Posted on 6 November 202230 March 2025 by Sarah O'Sullivan

Tees Financial has launched a new adviser academy, to train aspiring Financial Advisers. ‘The Academy at Tees Financial Limited’ has enrolled its first two participants, who will follow a structured two-year apprenticeship programme that combines studying for the CII’s Diploma in Financial Advice, with hands on experience of the day-to-day role of a financial adviser.

As well as studying for their Level 4 Financial Adviser exams, the Academy participants will learn on the job, shadowing experienced Tees financial advisers. The programme will provide participants with key objectives to take away from every stage and gives a broad experience of the different roles across the whole of the Firm.

James Appleby, Managing Director of Tees Financial Ltd, commented “The Academy at Tees Financial Ltd is a key part of our long term growth strategy, and we’re proud to be investing in young talented individuals who represent the future of financial advice.”

People person

Percy Sam is one of the Academy’s new recruits. He studied Industrial Design at Bournemouth University, graduating with a master’s degree in 2020. Soon after, he started a full-time office role with Tees Financial Ltd in the Bishop’s Stortford office.

A self-proclaimed “people person”, it didn’t take him long to get to know everyone by name. In November 2021, he saw an advert for the Academy and, encouraged by his colleagues, applied.

Before his interview, he talked to as many Financial Advisers as possible in order to understand the role and whether he really wanted to do it. “I want to help people” Percy says. “Managing your finances isn’t something they teach very well at school”.

Supportive environment

Having successfully passed the application process, Percy started his two-year journey in September 2022. The first month has been “exciting”, he says. “There’s not enough hours in the day!”

As well as getting used to the course structure and “financial services jargon”, he has started studying through the online learning course. He’s particularly excited to start shadowing advisers: “You get to learn whilst on the job and you get to see how it all works in practice as well as theory”.

“Tees is such an amazing place to work” he adds. Experienced advisers are “open and interested to talk about what they do”, which creates a “very supportive” learning environment.

Fitness to finance

Guy Pearson, who studied Exercise, Nutrition and Health at Nottingham Trent University, is also the Academy’s new recruit.

After graduating in 2018, he set up as a Personal Trainer, before the pandemic disrupted his business and prompted him to change career paths. “There are actually a lot of similarities between personal training and Financial Advice” Guy notes. “Both are, fundamentally, about assessing someone’s current situation, finding out where they want to be and planning how they’re going to get there.”

In 2021, Guy joined a large advisory firm but felt that the programme lacked the support and resources needed to study for the Financial Adviser exams. That was when he decided to apply to the Academy at Tees Financial Ltd.

Structure and support

Guy was drawn to the structured approach of the Academy, which allows him to combine a carefully planned study schedule with on-the-job work experience. Tees provides all the support and resources needed for them to excel in the Financial Adviser exams, as well as abundant opportunities to learn from experienced advisers.

Having started in August 2022, he has already begun shadowing advisers. “It’s a great way to gain first-hand experience of the work” he says. “For four days a week, I get to shadow financial advisers, then one day a week I’m following the structured online learning.”

He appreciates the certainty of having the whole pathway mapped out in front of him, as well as knowing that, after two years, he will be a fully qualified Financial Adviser, with abundant work experience to boot.

Role models

The common factor between Percy and Guy is that neither of them expected to end up where they are now.

“The Academy at Tees Financial Ltd offers an opportunity to become a qualified Financial Adviser in two years” says James Appleby. “We’re looking for candidates with the right attitude and aptitude, regardless of past experience.”

“It wasn’t even on my radar” Percy admits. “I knew nothing about financial advising before joining Tees!” Having found his calling now, Percy is ambitious: he wants to become a Level 7 Financial Adviser. “I’ve always wanted to keep progressing” he says. “My goal is one day to match the experience and knowledge of the Tees Financial Advisers.”

Community impact

The Academy at Tees Financial Ltd is a rolling programme, which will welcome one or two new recruits each year. Part of Tees Financial Ltd’s longer-term growth strategy.

“We have a highly professional and experienced team of financial advisers at Tees and The Academy is a chance for them to share their wealth of knowledge with people at the start of their careers” says James Appleby.

Investing for the long term – lessons from the past

Posted on 27 September 202228 March 2025 by Sophie Soraf

The emergence of COVID-19 brought a rapid end to the drawn-out recovery of major stock markets from the share price lows associated with the financial crisis a decade ago. When the scale of the threat to lives and livelihoods became apparent, market analysts and investors reassessed the global economic outlook and corporate prospects; they didn’t like what they saw and a wave of selling followed, with inevitable consequences. Most share prices, and thus stock indices, were impacted, with market volatility continuing throughout 2020.

Market analysts and investors aren’t infallible, but when something like COVID-19 strikes they get nervous because closed borders, flight bans and lockdowns can pose a threat even to large companies, especially in exposed sectors. Axed dividends and distressed rights issues are anathema to the jittery; and the largest blue-chip companies aren’t immune. Little wonder then that the 100 shares comprising the UK’s blue-chip share index, the FTSE 100, rapidly lost about one-third of their combined value in late Februaryv and March 2020.

Lessons from history

Created in 1984 with a starting level of 1,000 points to provide a wider index of leading shares quoted in London, the FTSE 100 largely superseded the narrower Financial Times 30-share index launched in 1935. As a barometer of economic outlook and corporate prospects, the FTSE 100 has gauged a few storms over the past 36 years. A chart of its progress reveals a plethora of spikes and dips, the starkest of which can be associated with key events in recent financial history.

Chart: FTSE 100 since inception to 1 September 2021, source Yahoo and Trading Economics

Not the first FTSE 100 dip

After its launch on 3 January 1984, the FT’s new share index only slipped very briefly below 1,000 points that year. It then made progress, sometimes faltering, to hit 2,000 points by March 1987, by then buoyed by the effect of the previous October’s ‘Big Bang’ modernisation of the London Stock Exchange’s trading structure. Six months of further upticks followed and the index broke through 2,350 in early October 1987. It would be two years before that level was attained again.

On 19 October 1987, the Monday after The Great Storm ravaged Southern England, global stock markets suffered a crash so severe that the day became known as Black Monday. A tsunami of selling, much of it blamed on new-fangled computer-program trading, rapidly took the FTSE 100 down to around 1,600, starting with an 11% drop on the Monday and 12% the next day.

A 1,000-point drop

High interest rates and other threats to UK economic growth and even talk of an impending recession brought a 1,000-point drop in the FTSE 100 in the autumn of 1998, almost all of it recovered by the year-end. General bullishness continued through 1999, which ended with the index nudging 7,000. As the year 2000 unfolded, a combination of overvaluation, epitomised by the rapidly inflating ‘dotcom bubble’, and a global economic slowdown brought further investor jitters.

The bull market had marched the FTSE 100 up the hill; the ensuing three-year bear market marched it back down again to around 3,600 in the spring of 2003. The index would take another five years to climb back above 6,500, where it was delicately poised for the next big shock: the 2008 collapse of US investment bank Lehman Brothers and the cascade of failures prompting what became known simply as ‘the global financial crisis’. By March 2009, the index was down around 3,500 again.

Long term trend

It was a long haul back from there for the FTSE 100 but, after gyrations associated with various stages of the Brexit process, the start of 2020 saw it comfortably above 7,000. News of a new virus outbreak in an unfamiliar Chinese city seemed at first like a distant threat. As the outbreak turned into a pandemic, global markets faltered again and the FTSE 100 headed below 5,000 before recovering some of the loss. COVID-19 has brought a reset of the blue- chip barometer, the FTSE 100 index.

Despite a variety of market shocks and rebounds, the index still has a long term growth trend. It is important to remember that some market volatility is inevitable; markets will always move up and down. As an investor, putting any short-term market volatility into historical context is useful.

Financial advice and regular reviews are essential to help position your portfolio in line with your objectives and attitude to risk, and to develop a well-defined investment plan, tailored to your objectives and risk profile.

The ascent of the 1990s

Share-price recovery was slow, hampered by a short UK recession in 1991-92 caused in part by high interest rates and an over-valued pound associated with efforts to keep sterling within Europe’s exchange rate mechanism. After Chancellor Norman Lamont took sterling out of the ERM in September 1992, having spent billions and upped base rate to 15% trying to stay in, the index gained about 14% in six months.

As 1994 dawned, a decade on from its launch, the FTSE 100 stood at around 3,400; although then, as now, changes had been made to its constituent shares as companies’ respective market capitalisations waxed and waned. Concerns about the economy and tax plans dampened sentiment and the index fell below 3,000 during the first half of 1994 before starting a five-year ascent to break the 6,000 barrier in the summer of 1998. After a 500% rise in 14 years, what came next for the FTSE 100?

The value of investments can go down as well as up and you may not get back the full amount you invested.
The past is not a guide to future performance and past performance may not necessarily be repeated.

How inflation impacts your finances

Posted on 8 August 202230 March 2025 by Sophie Soraf

Following a sustained period of historically low inflation, the recent upsurge in price pressures has vividly highlighted the impact inflation can wreak on people’s finances. A sharp rise in the cost of living effectively takes a large chunk out of the purchasing power of money and thereby erodes the real value of cash savings. It is therefore important to understand the concept of inflation and the impact it has on your wealth. Here, we consider these issues and look at the potential benefits of longer-term investment as a way of protecting your money from the effects of inflation.

Inflation is a term used to describe the increase in the general level of prices for goods and services over time, with the rate of inflation quantifying how quickly prices are rising. There is no single approach to measuring inflation, partly as figures differ depending upon which specific bundle of goods and services are included in the calculations. However, the Office for National Statistics (ONS) publishes a number of consumer price indices each month which provide its latest estimate of inflationary trends. The UK’s official headline measure is the Consumer Prices Index (CPI) 12-month rate which compares prices in the current month with the same period a year earlier.

Measure inflation

A good way of understanding how a price index works is to think of an extremely large shopping basket containing a mix of the various goods and services a typical household buys – the price index basically shows changes to the overall cost of that basket over time. For the CPI, prices for around 700 things people regularly buy are recorded each month. These cover a variety of items including a loaf of bread and ready-meals, the cost of a cinema ticket and a pint at the local pub, as well as larger items such as a holiday and a car. To calculate the index, ONS compares the current cost of the basket with what it was a year ago – the change in price level is the annual rate of inflation.

The impact of high inflation

A healthy economy generally requires inflation to be low and stable. While a small amount of inflation is considered helpful, high and unstable rates can cause extreme economic difficulties as it erodes the purchasing power of household finances and makes it difficult for people to plan how much they can spend, save or invest. In the UK, the government has a 2% target for how much prices should go up each year with the Bank of England tasked with keeping the figure around that level. The Bank’s principal tool for maintaining a low and stable inflation rate is to raise or lower interest rates.

What is “bank rate”?

Bank Rate is the most important interest rate in the UK and has a significant impact across many aspects of the economy. It is sometimes referred to as the Bank of England Base Rate and is set by the central bank’s nine-member Monetary Policy Committee. The rate directly influences other interest rates, including the lending and savings rates high street banks and building societies offer their customers. The level of the Bank Rate therefore ultimately determines both the cost of mortgages and loans, and how much people can expect to receive on savings held in deposit-based accounts.

Interest rates and inflation

Economic theory shows there is an ‘inverse’ relationship between inflation and interest rates: in other words, when interest rates are low inflation tends to rise, and when rates are high inflation tends to fall. This is because high interest rates make it more expensive for people to borrow money and encourages them to save, which means they typically spend less on goods and services, and this results in prices rising more slowly; and vice versa. So if prices are deemed to be increasing too rapidly, the Bank of England will typically raise interest rates in order to try to slow inflation down.

Purchasing power

When the rate of inflation is low, its impact can seem relatively modest, but when inflation is high it can drastically erode the purchasing power of money. For example, if the rate of inflation is 1%, then the price of a loaf of bread that cost £1 a year ago would now be £1.01. However, if inflation is running at 10%, the price of the same loaf would rise to £1.10. In other words, households can buy less for the same amount of money or, to put it another way, money has effectively lost value.

Inflation makes things more expensive over time.

Impact on savings

Inflation has a similar devaluing effect on deposit-based savings balances. For instance, a saver who held £10,000 in a building society account a year ago earning a rate of 1%, would receive £100 in interest and thereby see their total balance rise to £10,100. However, if inflation was running at 10% then the same £10,000 worth of goods and services that could have been bought a year earlier would now cost £11,000. So, although the saver may feel they have earned £100, when factoring in the effects of inflation, the value of their cash savings has actually declined by £900 in real terms.

Investment potential

While cash savings will always be important, particularly as a source of rainy-day funds, in the current economic climate people holding a large proportion of their assets in cash look set to lose money in real terms. For anyone planning to put money aside for a number of years, it may therefore be worth considering investments as a potential way to protect capital from the effects of inflation. Although past performance is no guarantee of future profits, stock market investments have tended to produce returns that could potentially inflation-proof money over the longer term, providing savers are prepared to take some degree of risk.

Tax-efficient investments

As well as potentially offering protection from inflation, some investment products also enjoy significant tax advantages that make them particularly attractive investment propositions. Both pensions and stocks and shares ISAs fall within this category.

Pensions

Investing via a pension is one of the most tax-efficient methods of saving for the long term as investors receive tax relief at their highest marginal rate of Income Tax on all contributions made subject to annual and lifetime allowances. This means that some of your earnings which would have gone to the government as tax are instead diverted to boost your pension pot. This effectively results in it costing you less to save more in a pension plan.

Stocks and shares ISAs

Individual Savings Accounts (ISAs) are another tax-efficient investment option and provide greater flexibility than a pension as they allow access to your money before the age of 55. Investors can save up to £20,000 each tax year in a stocks and shares ISA with the money having the potential to grow free of UK Income Tax and Capital Gains Tax. These products can be a particularly good way to save for medium or long-term financial goals, such as a wedding or new car.

This graph shows the effect of a 2% inflation rate on £100 over a 40-year period with cash assumed to earn no interest – maybe kept under your mattress! A growth rate of 7% per annum is assumed for equities but is for illustrative purposes only and not an indication of future performance. After 40 years, the initial £100 can only buy goods that would be worth just under £45 at today’s prices, compared to an equity investment which would have the purchasing power of £704.

Obviously, very few of us would keep cash under the mattress, but even with cash deposits earning 1% a year, £1 would only be worth £1.49 after 40 years if held in cash, or over 10 times that amount if invested in equities, assuming a growth rate of 7% p.a.

Ensuring your business is protected during uncertain times

Posted on 30 June 202130 March 2025 by Sophie Soraf

Businesses across many different sectors are slowly getting back on their feet as the economy continues to improve following the pandemic. This crisis has shown that in times of great challenge, your employees – their skills, knowledge and understanding of how your business ticks – are essential to keeping your business running.

So looking after your employees and your business go hand in hand. In a recent survey, 35% of businesses said one of the top three risks to their business would be an owner becoming critically ill and being unable to work. 52% said they would cease trading within one year were they to lose such a key person, and yet, surprisingly, only 18% had considered cover for the illness or death of a key person. (Source: Legal & General’s State of the Nation Report 2021). That’s very curious but the message of this article is: don’t be that business! There are two key groups of insurance that can help protect your business and employees from financial losses resulting from illness and death.

Policies that protect your business against financial losses resulting from the death or illness of a key staff member or business partner, and
Insurance that provides financial assistance to employees and their families in the event of their death or inability to work.

Protecting your business

When might I need shareholder/partnership protection insurance?

Shareholder or partnership protection cover insures a business against the loss of a shareholder or key business partner, which would likely leave the remaining business owners in a precarious position. With limited companies or partnerships, the main risk is that the deceased owner’s share in the business will be passed on to a family member, who may have little interest in taking over their role.

Essentially, shareholder or partnership protection insurance is a life insurance policy that pays out to the surviving business owners, based on an agreement that they will use the money to purchase the deceased’s outstanding shares in the business.

The cover you take out will depend on your business structure:

Shareholder protection is designed for limited companies, with the life insurance taken out on the lives of the company’s shareholders.

Partnership protection is designed for partnerships and limited liability partnerships, with the life insurance taken out on the lives of the business partners.

The policy might also include critical illness cover, in the event that a partner or shareholder does not wish to continue their involvement in running the business following their treatment or recovery from a serious illness.

Is key person insurance appropriate for my business?

Key person insurance protects businesses against the financial losses incurred if a ‘key’ employee becomes ill or dies while working for the company. This could be a CEO, business partner or senior employee considered essential to the successful running of the business. A payout from this kind of insurance can keep a business trading while recruiting for a replacement or undergoing reorganisation.

Some types of business insurance, such as employers’ liability, are legally required to run a business. Key person insurance is not one of them, but the loss of a key employee could affect the business in many ways.

Clients may react negatively or lose confidence in the business, shareholder confidence could plummet, and the skill, knowledge and experience of the key employee may be difficult, or even impossible, to replace.

Particularly for small businesses, losing a director or head of department could result in the company’s collapse, which is why the financial assistance provided by key person insurance could prove to be a lifeline.

Protecting your employees

How do my employees benefit from death in service insurance?

Also known as relevant life assurance, death in service is a type of insurance that pays out a tax-free lump sum to an employee’s beneficiaries if they die whilst working for your company. They don’t have to be at work or performing a work-related activity to receive the benefit; they simply have to be on the payroll of your company when they die or are diagnosed with a terminal illness.

This type of insurance is the second most valued employment benefit after private medical insurance, as can help your employee’s beneficiaries with costs such as funeral arrangements and living expenses at a very difficult time. The lump sum paid out is usually between two and four times the employee’s basic salary.

How will group private medical insurance benefit my business?

As mentioned above, group private medical insurance is one of the most popular employee benefits a business can offer, and provides your employees (and often their families) with access to private healthcare services.

While it is one of the more expensive employee benefits, private healthcare can offer immeasurable advantages –not only to your employees, but to you as a business. Employees will not be forced to take days off to access healthcare appointments, as private facilities usually offer appointments out of hours. They won’t face lengthy waits for appointments or treatment, so they can get better sooner and return to work more quickly.

The Coronavirus crisis has made us all too aware of the strain and pressure under which the NHS has been placed – there is now a huge backlog of patients waiting for treatments and routine surgical procedures. Offering your employees access to private healthcare is therefore a bigger draw than ever and could greatly help you to attract and retain the best talent.

Is permanent health insurance a good option to protect my employees?

Arranging permanent health insurance (or PHI) on behalf of your employees provides protection for them in the event of an injury or long-term illness that renders them unable to work.

PHI is another name for income protection insurance, but the premiums are paid by the business rather than the individual. The usual payout is between 50% and 75% of an employee’s full salary, potentially until they retire, and it can help your employees continue to pay for key outgoings such as mortgage and childcare costs until they are able to return to work. As such it is often considered by employees to be a more valuable benefit than private medical insurance.

The benefits usually start after a ‘waiting period’ of up to 52 weeks, typically after work-related sickness pay comes to an end.

The wording of PHI polices from different providers can vary greatly in terms of what exactly they cover, so it’s always best to check the fine print. As an employer, they can benefit you by incentivising your employee to return to work as soon as they are ready, in order to regain 100% of their salary.

What benefits your employees, benefits your business

Insuring your business and employees against financial loss, illness and death may be an added expense, but it could be the move that helps your business stay afloat during uncertain times. At Tees, we’re here to discuss your business insurance needs and advise you on which type of policy could deliver the greatest benefits to your organisation.

This material is intended to be for information purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Tees is a trading name of Tees Financial Limited which is regulated and authorised by the Financial Conduct Authority. Registered number 211314.

Tees Financial Limited is registered in England and Wales. Registered number 4342506.

One farming family, over 30 years of trusted legal and financial advice

Posted on 12 April 202129 March 2025 by Sarah O'Sullivan

For over three decades, Tees has provided expert legal services to multiple generations of the Miller* family, a prominent agricultural family with extensive farming, land and property interests located across several English counties.

Our senior partner and specialist in rural succession and estate planning, Catherine Mowat, has worked closely with the Millers for many years, helping them capitalise on opportunities for efficient estate planning and take advantage of valuable Inheritance Tax reliefs.

Alongside Catherine’s team, our Commercial Property, Residential Property, Commercial and Wealth Management teams have worked together collaboratively in order to help the Miller family effectively manage their business and property interests.

Passing assets on to the next generation

Catherine has worked extensively with the Millers over a number of years to put in place comprehensive arrangements that will enable more senior family members to pass on their assets effectively to future generations, whilst minimising the Inheritance Tax (IHT) payable on their estate.

The family were advised to make substantial lifetime gifts to their children and grandchildren, enabling assets to be passed on to younger generations in a controlled way.

How does Inheritance Tax (IHT) work?

IHT is a tax on the capital value of assets (including money, property and possessions) either when somebody has died or on some gifts made during lifetime. On death, it is generally payable at a rate of 40% on all assets over the value of £325,000, although there are exemptions and reliefs that can be used to lessen the amount due. Another way of reducing the IHT payable on your estate is to make lifetime gifts. If you make gifts more than seven years before you die, there will usually be no IHT due on these gifts on your death. If tax does arise, only gifts given less than three years before you die attract the full 40% IHT rate, making lifetime gifts an excellent opportunity for passing on assets to minimise tax.

These lifetime gifts also caused the estate value belonging to the children to rise, increasing their IHT liability. Here, our Wealth team stepped in to help set up suitable life insurance arrangements, written in trust to minimise the impact of a significant tax bill.

Why should I write my life insurance policy in trust?

Writing your life insurance in trust is a way to avoid paying IHT on the eventual payout. When you place an asset into a trust, you essentially give up ownership of that asset to the trust and appoint trustees to oversee it (this can be a solicitor, like Catherine, or somebody else). As the assets (in this case, the life insurance policy) don’t officially belong to you, they aren’t classed as being part of your estate and are therefore not subject to IHT.

Catherine has also worked with the Millers to draft essential estate planning documents such as Wills and Powers of Attorney, and acts as a trustee for the various trusts within which the family’s business and property assets are held. Her many years spent advising this family have enabled her to build a strong relationship with the Millers, bound by mutual trust and respect.

Taking advantage of Inheritance Tax (IHT) relief

Over the years, our Wills, Trusts and Probate team has worked closely with the Millers to ensure their entitlement to valuable IHT reliefs. For example, Catherine’s advice has enabled the family to take full advantage of Agricultural Property Relief (APR) on their eligible assets.

What is Agricultural Property Relief (APR)?

APR allows farming families to pass on agricultural property at a reduced or 0% rate of IHT, either during a person’s lifetime or in their Will. To apply for APR, the land or property must have been owned for at least seven years, or occupied for two years and must be used for growing crops or rearing animals, or take the form of farm buildings, cottages or houses. It does not apply to farm equipment or machinery, derelict buildings, harvested crops or livestock. APR can be due at 100% or 50%, depending on the circumstances.

Catherine also regularly reviews the balance of the Millers’ business activities to ensure that no entitlement to Business Relief (BR) is lost, by using the ‘Balfour’ test.

What is Business Relief (BR)?

BR allows business owners to pass on certain business assets at a reduced or 0% rate of IHT, either while they are still alive or via their Will. The owner must have owned the assets for at least two years before they died for them to be eligible. BR is due at 100% for:

A business, or interest in one
Shares in an unlisted company

It is due at 50% for:

Shares controlling over 50% of the voting rights in a listed company
Land, buildings or machinery owned by the deceased and used in a business in which they were a partner or controlled
Land, buildings or machinery used in the business and held in a trust the business has the right to benefit from

To be eligible for BR, a business must also be classed as a predominantly trading business. However, many farms are becoming increasingly diversified, with activities such as cottage rentals and holiday lets shifting the balance from trading to investment.

Catherine used the Balfour test to assess the Millers’ farming business and used the results to advise the family on achieving the best balance between trading versus investment activities within the farming partnership for BR purposes.

Strategic land and property solutions

Our Commercial Property team regularly steps in to assist the Miller family in matters relating to the lease or sale of land and properties, which include a range of sites with commercially let units, and other strategic deals such as granting options. Rural specialists within our Commercial Property team will negotiate and facilitate these various land transactions.

An example of the type of planning advice we offer might be in relation to land owned by a family trust on which planning permission has been obtained for development. In this situation our Corporate team would step in to advise on the incorporation of a ‘freezer’ company.

The team would also prepare bespoke articles of association, ‘freezing’ the value of certain interests in the company in order to cap ownership. This ensures that the growth and value of the land will be passed on to the next generation tax-efficiently and limit their IHT liability.

What is a ‘freezer’ company?

Also known as a family investment company (FIC), a ‘freezer’ company is essentially a private limited company whose shareholders are all family members. Commercial solicitors can help the family prepare bespoke articles of association that set out the rights and interests each party holds within the company. For example, the parents can set themselves up as voting shareholders – thus maintaining control over the company – but ‘freeze’ the value of their interests in the company to cap their ownership.

Meanwhile, the children can be non-voting shareholders but own the majority of the shares, allowing the growth and value to pass on tax-efficiently to the next generation. This makes ‘freezer’ companies an ideal vehicle for intergenerational wealth management, allowing assets to be passed on during your lifetime whilst still retaining control of them. If you live for more than seven years after setting up the company, no IHT will be due (according to the rules of lifetime gifting).

A full- service firm rural families can depend on

For over a century, Tees has been a trusted partner to farming families like the Millers, helping them pass the family business from generation to generation. In this time, our agricultural specialists have developed a unique understanding of the challenges facing the rural community.

From tailored business advice to passing your land and assets tax-efficiently to the next generation, our specialist agricultural lawyers can help you navigate the complex relationship between business, land and family interests.

*Please note that the family’s name has been changed for anonymity.

What is pension drawdown and how does it work?

Posted on 12 January 202130 March 2025 by Sophie Soraf

Pension (or income) drawdown is one of the ways you can use your pension pot to provide a regular income when you reach retirement. Drawdown is a flexible way of accessing your pension, while allowing your pension fund to keep growing. Here, we explain exactly how drawdown works and whether it’s right for you.

Pension drawdown is available to those aged 55 or over (increasing to age 57 in 2028) and enables you to take an income from your pension pot while leaving your remaining pension savings invested.

You can choose to move your pension into drawdown in one go or a little at a time. You may be able to do this with your current provider or by transferring your pension to a drawdown provider elsewhere. If you decide to transfer, it’s important to first check you won’t lose any valuable benefits or be charged high exit fees.

Under rules introduced in April 2015, you can take up to 25% of your pension pot you use for drawdown as tax-free cash – you can take this in one go or each time you move part of your pension into drawdown. Further withdrawals can then be made as and when you choose, whether you do this in one go, take regular monthly payments, or withdraw lump sum payments as and when you need them.

Drawdown allowances and tax rules

The first 25% you take of your pension pot will be tax-free, while the remaining 75% will be subject to Income Tax. How much you pay will depend on your total income for the year and your tax rate. For 2020/21 this means:

if you have no other income, no tax will be due on the first £12,500
on income between £12,501 and £50,000 you’ll pay tax at 20%
on income between £50,0001 and £150,000 you’ll pay tax at 40%
on income over £150,000, you will pay tax at 45%.

What are the benefits of drawdown?

One of the biggest advantages to drawdown is the flexibility it offers. Not only does it enable you to take money from your pension savings whenever you need it, there’s no limit on the number of withdrawals you can make, and you can take out different sums each year.

At the same time, the remainder of your pension pot can stay invested which means if your investments perform well, your income could grow throughout retirement. Drawdown gives you the option of being able to choose your own investments, use ready-made portfolios or let an adviser choose on your behalf.

What are the downsides?

It’s important to understand that it’s your responsibility to ensure your retirement income lasts the duration of your retirement and to understand that the more you withdraw from your pension pot, the quicker it will be depleted. If you make withdrawals too frequently, your retirement income could run out earlier than expected.

Consider, too, that large withdrawals can push you into a higher tax band and, as soon as you withdraw more than your 25% tax-free lump sum, the Money Purchase Annual Allowance (MPAA) applies which limits the amount that be contributed to your pension to £4,000 per year.

Additionally, there’s no guarantee that your investments will continue to grow which means you could get back less than you invest.

Buying an annuity is still appropriate for many people in retirement as it allows you to use your pension savings to buy a guaranteed income that lasts the rest of your life. If you prefer, you can use part of your pension savings to buy an annuity and leave the remainder in drawdown.

How to manage drawdown funds during retirement

If you’re considering drawdown, it’s important to plan carefully, taking into account how long you need your pension to last – remember that your retirement could last 30 years or more. As part of this, you’ll need to consider what to do with any cash you withdraw over the short, medium and long-term:

Short-term: when still in employment, it’s advisable to keep three to six months’ worth of income in a current account or savings account that will give you instant access for covering emergency costs. Upon retirement, this should increase to one to three years’ worth of expenditure.

Medium-term: cash that’s not required in the immediate future could be tied up in a fixed term savings account as these tend to pay higher interest rates than you’ll get with an easy access account. In return, you must leave your funds untouched for the term of the account, which could be anywhere between six months and five years. As a general rule, the longer the term of the account, the higher the rate of interest. You could choose to lock some cash away in a shorter-term account, and another chunk in a longer-term one.

Long-term: investing can be a good option for any cash you won’t need to use for longer than five years. Investing in the stock market tends to give better returns than cash savings over the long-term but remember that your investments can fall in value as well as rise, so you should ensure you understand the risks involved first.

Key questions to consider

Before deciding whether pension drawdown is right for you, it’s worth asking yourself the following questions to ensure you fully understand your options:

How much of my pension do I want to move into drawdown?
Will I be charged an exit fee if I transfer my pension?
Am I comfortable managing my retirement income or would a guaranteed income be more suitable?
How regularly should I make withdrawals?
Am I comfortable with the investment risk and do I have other income to fall back on?

How we can help

Should you need help answering these questions, our expert pension advisers are on hand to discuss all your pension and retirement options. We take a holistic approach tailored to you, the individual, and will always make alternative suggestions if appropriate.

Our advisers will talk to you in jargon free language to help you understand your choices and our advice and recommendations will be focused on helping you to get the best possible result.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

This material is intended to be for information purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Past performance is not a reliable indicator of future returns and all investments involve risks including the risk of possible loss of capital. Some information quoted was obtained from external sources we consider to be reliable.

Tees is a trading name of Tees Financial Limited which is authorised and regulated by the Financial Conduct Authority. Registered number 211314.

Tees Financial Limited is registered in England and Wales. Registered number 4342506.

Long-term Care Planning: Get the Best Advice

Posted on 21 September 202030 March 2025 by Sophie Soraf

Our SOLLA (Society of Later Life Advisers) accredited care fee planning team can help you create a robust plan for later life, in order to avoid difficult financial decisions for yourself and your loved ones down the line.

Long-term care refers to the range of services available to support those who need long-term or permanent assistance in caring for themselves. This can include residential and nursing home care, as well as domestic help.

Services are provided by a wide range of different bodies and organisations, including local Authorities, the NHS, private organisations and charities.

In the UK, better standards of living and improvements in healthcare have led to people enjoying a longer life expectancy. While in 1950, the average person could expect to live until they were nearly 69 years of age, today we have a life expectancy of over 81 years old.

While many older people can now expect to live to an advanced age in good health, it is inevitable that some will require care and assistance as they reach their later years.

How much does long-term care cost?

According to the Money Advice Service, the average annual cost of residential care is between £30,000 and £40,000 per year. These costs may not be all-inclusive, either – visits to the hairdressers, day trips and other forms of entertainment, for example, can all cost extra.

Home care costs will vary according to the person’s needs. On average, the cost of a home carer is around £17 per hour. So, even if you only need two hours of care per day, it could still add up to £12,500 per year.

Does the government help to pay long-term care fees?

Government funding is available to help you with the costs of long-term care. The amount to which you are entitled varies across the UK, with each devolved nation offering different levels of support.

In the autumn statement 17th November 22, chancellor Jeremy Hunt said the introduction of the new £86,000 cap on the amount anyone in England will need to spend on their personal care over a lifetime, will be delayed two years and now come into effect in 2025.

England and Northern Ireland

If you live in England or Northern Ireland, the government funding you receive will depend on how much capital you have. If you have capital assets:

Less than £14,250: You’re entitled to local government funding to cover the cost of your care. You won’t be expected to contribute from your capital, but if you are still drawing an income (e.g. a State or private pension), you’ll be expected to contribute this except for a personal expenses allowance (PEA) of £24.90 per week. If the cost of your care is more than your local authority’s standard rate, you may have to pay the difference – this is called a ‘third party top up’.

Between £14,250 and £23,250: You’ll be entitled to some funding, but you may have to contribute all income in excess of the PEA, as well as £1 per week for every £250 in capital you have between the upper and lower limits. For example, if you have savings of £21,000, you’ll be expected to contribute £27 of your capital per week in addition to your income.

Over £23,250: You will have to pay for your own care.

Scotland

The capital limits are higher in Scotland, but similar rules apply.

If you have capital assets:

Less than £18,000: You’re entitled to funding to help with your care fees. As above, you won’t be expected to contribute from your capital, but you will be expected to contribute all income over the PEA (£28.75 per week in Scotland).

Between £18,000 and £28,500: You’ll be entitled to some funding from your local authority, but will be expected to contribute £1 of your capital per week for every £250 you have between the upper and lower limits, as above.

Over £28,500: You will be expected to pay the full cost of your care.

Wales

In Wales, there are different rules depending on whether you need at-home or residential care.

At-home care

If you have capital worth:

Less than £24,000: You will not be expected to use your capital to pay for your care. Your local authority can only look at your income when deciding what to charge you.

Over £24,000: You will be obliged to pay for your home care, but the Welsh government has capped the cost at a maximum of £90 per week.

Residential care

If you have capital worth:

Under £50,000: You won’t be expected to use your capital to pay for residential care. You will, however, be expected to contribute all income in excess of the PEA, (£32 per week in Wales).

Over £50,000: You will be expected to pay the full cost of your care until your capital is reduced to £50,000 or below.

What counts as ‘capital’ for long-term care means tests?

For the purpose of local authority means tests, your ‘capital’ includes the value of the following assets:

Property (although this can be disregarded under certain circumstances)
Money held in bank accounts/building societies
Investments
Premium bonds
Cash
Any benefits you’re eligible for (even if you’re not claiming them)

What if I’m not entitled to government funding for my long-term care needs?

If you have a disability or complex health needs, you may be eligible for NHS continuing healthcare (CHC) free of charge. It is a package of care that can be provided at home, in a nursing care home or in a hospice. You’re more likely to qualify if you have healthcare, as opposed to social care needs.

If you are ineligible for government or NHS funding, there are ways to self-fund your care. Whether you’re paying in full or in part, the costs can mount up and it’s wise to prepare yourself financially. You could do this, for example, through savings and investments, or through a care fees plan (also known as an immediate needs annuity). This is a specialist insurance plan designed to convert capital into income to meet your care fees.

Consulting with an independent financial adviser well ahead of time will equip you with the tools you need to prepare yourself for the potential costs of long-term care.

Will I have to sell my house to pay for long-term care?

Your property will be included in government means test assessments, except in the following circumstances:

Your spouse/civil partner lives in the property
A disabled relative lives in the property
A relative over the age of 60 lives in the property
A child under the age of 16 lives in the property
Your care needs are only temporary
You are in your first 12 weeks of needing permanent care

If you do need to sell your home to pay your care home fees, the 12-week deferment period (which only applies if your capital falls under the upper limit in your country of residence) gives you time to find a buyer for your property and complete the transaction before you have to start paying fees.

Can I give away my property so it’s not included in the means assessment?

Even if you give your home away, for example to your child or another relative, it may still be counted as capital in the means test. This is because your local authority may see it as a ‘deprivation of assets’. This means that you have gifted your property for the sole purpose of discounting it from a means assessment. So, you might have to pay for the cost of your care as if you still owned your home anyway.

What happens when I can no longer make important decisions for myself?

Some people who require long-term care have lost mental capacity, and no longer have the ability to look after their money or advocate for their needs. That’s why planning ahead is so important, to enable your family to step in and manage your affairs when you need it most.

You can nominate somebody who is legally entitled to manage your personal and financial affairs with a document called a Lasting Power of Attorney (LPA). There are two types of LPA:

Health and Welfare LPAs allow your nominated attorney to make vital decisions relating to your health and personal welfare (including decisions surrounding long-term care);
Property and Finance LPAs will allow them to make key decisions about your money and property (e.g. whether or not to sell your house to pay for care home fees and accessing your capital to pay for your care).

Without an LPA in place, your family could face a drawn-out court process before they are able to give you the help you need.

Assistance is at hand

If you have capital and property that places you above the capital limits in your country of residence, then it is extremely important to seek professional independent financial advice from an adviser specialising in long-term care planning.

Our SOLLA (Society of Later Life Advisers) accredited care fees planning team can help you create a robust plan for later life, in order to avoid difficult financial decisions for yourself and your loved ones down the line.

At Tees we offer expert independent financial as well as legal advice which gives us the ability to combine your financial planning and legal needs, giving you a fully joined-up view.

We can take care of your later life financial plans in conjunction with advising you on estate planning and Powers of Attorney. We’re here to help, and only a phone call away.

Critical illness vs income protection insurance

Posted on 27 August 202030 March 2025 by Sophie Soraf

Recent events have acted as a stark reminder about the importance of protecting ourselves financially – the pandemic has made us all aware that illness can strike at any time and of the devastating impact this can have on ourselves and our families.

Here we explain the ins and outs of critical illness cover and income protection insurance, the difference between the two, and which type of cover might work best for you.

What is critical illness cover?

Critical illness cover is a long-term insurance policy that pays out a tax-free lump sum if you develop a serious illness, which must usually be permanent or terminal. To receive a payout, your condition must be specifically listed as a critical illness within your policy wording.

Examples of specified critical illnesses include (but are by no means limited to):

Heart attack
Stroke
Certain cancers/stages of cancers
Alzheimer’s disease
Multiple sclerosis

The payout you receive can help you pay your rent or mortgage, bills, and any adaptations you might need to make to your home to accommodate your illness or disability.

What is income protection insurance?

Income protection insurance is designed to provide you with a monthly income if you are unable to work due to illness or injury. It will pay out a percentage of your usual monthly income until you can return to work, allowing you to recover without the stress of a significantly reduced income.

This type of cover usually features a waiting period, with payments designed to commence once you’re no longer covered by sick pay or other insurance policies. You can keep your premiums low by making the waiting period longer, and vice versa. You can also usually claim multiple times within the policy term for different injuries or illnesses.

While income protection covers a wider range of illnesses, insurers use a ‘definition of incapacity’ to determine the eligibility of a claim. The two most common definitions are:

Suited Occupation – if you are off work due to illness or disability, your insurer will assess your skills and capabilities and decide whether you could conceivably perform another job to which you are ‘suited’.
Own Occupation – your insurer will assess your ability to perform the duties and responsibilities of your current role.

What is the difference between critical illness and income protection insurance?

There are a number of differences between the two types of protections:

Critical illness cover pays out a single lump-sum, while income protection insurance pays out a monthly allowance (normally a set percentage of your usual monthly income) until you are well enough to return to work or you retire.
Critical illness cover will only pay out if you are diagnosed with a specific serious illness that is listed within your policy wording. On the other hand, you can claim on your income protection insurance for most illnesses or injuries that leave you unable to work.
While you can claim multiple times on an income protection policy, a critical illness policy is designed to provide a one-off payout.

Which cover would suit me best – income protection or critical illness insurance?

Choosing which cover is right for you will depend on a number of factors including whether you’re looking for a lump sum payment or a regular payout of a percentage of your monthly salary, the level of flexibility offered by the policy, and of course, cost.

Lump sum payment

Many people feel more comfortable at the thought of a lump sum payout, so if you’re one of them, then critical illness cover could be best for you. It also allows you to choose the level of cover you want, although of course covering yourself for a bigger lump sum will inevitably increase your premiums.

But it’s important to remember that you’re not entitled to multiple payouts. As soon as your insurer has paid out on a claim, your policy will come to an end. What’s more, if or when the money runs out (which may be sooner than you think if you’re using it to pay for equipment, adaptations to your home, carers, etc. that may be required following your illness), no further support will be forthcoming.

Regular payout

Income protection insurance pays out a percentage of your regular income, providing ongoing cover for any illness or injury that prevents you from working. The disadvantage here is that your monthly payouts are limited to what you’re currently earning; if you’re on a low income, your payouts will be accordingly low.

However, the policy is designed to cover you until you return to work, or until you retire. If you never return to work due to your illness or disability, income protection could actually pay out more in the long term than a lump sum critical illness policy.

Flexibility

In some ways, critical illness cover isn’t as flexible as income protection, as it only covers a scheduled list of illnesses. In comparison, income protection is there to cover you against most illnesses that prevent you from working, so it could be argued that income protection insurance is more flexible and there is less chance that your insurer will refuse to pay out on your claim.

Critical illness cover on the other hand, has the advantage of paying out straight away, whereas you’ll have a waiting period before any payout starts with an income protection policy. This may be unsuitable if you have little or no savings to fall back on if your income were to stop suddenly. So, if losing your income would leave you financially fragile within months, it may be best to take out a critical illness policy.

Cost

Your monthly premiums will typically be lower if you opt for income protection insurance, despite the total potential payout often being higher (i.e. it would pay out more in the long term if you never recovered sufficiently to return to work).

This is because the likelihood of the insurer having to pay out the full amount is much less than with a critical illness policy (where the policyholder is certain to receive a full payout if they meet the policy criteria), as most people who are unable to work are usually able to return after a period of recovery.

Would critical illness or income protection insurance cover me for COVID-19 ?

It’s unlikely that a critical illness policy would cover you if you contract Coronavirus, for several reasons. Firstly, as a new illness, it’s unlikely to be listed as a specific illness within your policy. Secondly, Coronavirus is a mild illness for the majority of people – so is unlikely to be categorised as a critical illness – in most circumstances anyway.

However, if you were to go on to develop another serious condition as a result of contracting COVID-19, which is listed within your policy (e.g. kidney, liver, heart or respiratory failure), then yes, you would be covered.

Income protection insurance is likely to pay out if you were out of work long-term due to Coronavirus symptoms or complications. However, if you were self-isolating, you would be unlikely to be covered unless your isolation has been advised by a medical professional. Furthermore, the waiting period means that you would usually have come out of self-isolation by the time any payout could be made.

If your Coronavirus symptoms were to continue beyond the waiting period, then your claim may be accepted by your insurer, subject to individual policy terms and conditions.

Directors’ pension: maximise business profit and provide for your future

Posted on 3 August 202030 March 2025 by Sophie Soraf

You’ve invested years as well as considerable time and effort building up your business. So, the question now is: how do you extract the profits in the most tax-efficient way? The simple answer is, pension contributions.

If you have a limited company, contributing to a pension can bring significant tax advantages. Pension contributions can be treated as an allowable business expense and offset against your company’s corporation tax bill.

Whilst Business Asset Disposal Relief (BADR) Relief offers an attractive tax benefit to individuals (subject to certain criteria) and is available on business sales at 10% up to a value of £1m, it’s worth remembering that this money has already been subject to Corporation Tax and so the net proceeds are reduced and can take a considerable slice of your hard-earned profit.

What are the tax benefits?

If you run your own business, you can make personal contributions to a pension or you can make contributions through your company, with both options bringing significant tax advantages. For Company Directors, there are numerous benefits of doing so in terms of tax and control:

Company Directors have a range of sophisticated options available to them, over and above those offered by a default Auto Enrolment employee scheme
Contributions for Directors can be made by the Company as an Employer Contribution
Company Directors have the ability to control the timing and amount of contributions
Pension contributions are deductible against Corporation Tax

Attractive schemes for directors

The pension schemes available to Company Directors are attractive in that they are able to hold a much wider range of assets than workplace and personal pensions.

These arrangements can invest in shares listed on any HMRC recognised stock exchange; investment funds such as unit trusts and open-ended investment companies (OEICs) deposit accounts with any UK authorised financial institution as well as commercial property including land.

Pensions for Company Directors can be arranged on either a personal or group basis.

What is a SIPP?

A Self-Invested Personal Pension (SIPP) offers more control to you as a Director and a wider investment universe than workplace pensions or Personal Pension Plans.

When paying into a SIPP from a limited company, you could make employer pension contributions directly from your company. Your limited company SIPP pension contributions can come from pre-taxed income so by paying money directly into your pension, rather than paying in from your salary, you could gain greater tax efficiencies.

If you are a higher or additional rate taxpayer, you can pay money straight into your pension via salary exchange, instead of declaring the income as profit and taking it out as a dividend.

Benefits of a Small Self-Administered Scheme (SSAS)

For some businesses with specific needs it may be that a Small Self-Administered Scheme (SSAS) is more appropriate. These arrangements offer a “pooled” approach for up to 11 members meaning that as a Director of an SME you can combine resources to purchase commercial property whilst retaining your own ear-marked fund.

Both SIPPs and SSASs benefit from the ability to be able to borrow up to 50% of the net assets of the scheme, which is another useful feature when considering commercial property investments.

Further benefits to saving in a pension

Savings inside a pension receive considerable tax incentives:

no capital gains tax on growth
no tax on income received and
pensions aren’t subject to Inheritance Tax

You may never pay tax on any of the funds invested within your pension.

Also worth considering is that employers don’t have to pay National Insurance on pension contributions. The National Insurance rate for 2023/24 is 13.8%, so by contributing directly into your pension rather than paying the equivalent in salary, you save up to 13.8%.

This means that in total, your company can save up to 38.8% by paying money directly into your pension rather than paying money in the form of a salary. Depending on your circumstances, this may or may not be more beneficial to you than paying personal pension contributions.

Bringing your premises into your pension scheme

A popular and tax efficient solution is for the pension scheme to purchase the property your business operates from. In this case all the tax benefits described above continue to apply whilst the employer pays rent to the pension scheme, thereby making further savings against Corporation Tax.

Add to this the investment flexibility that a director’s pension can provide and in certain circumstances the ability to make commercial loans back to the company, directors’ pensions can double up as a very useful business planning tool.

Is there a limit on contributions?

The amount that can be contributed to a pension and receive tax relief is £60,000 per annum. Once the current year’s allowance has been used, any unused allowance from the previous three years can be brought forward.

Safe and secure

Pensions are held in trust so it is not normally possible for creditors to make a claim against your pension scheme unless it can be demonstrated that the funds were invested with the intention of avoiding a claim. Provided your contributions have been regular and made for the purpose of providing retirement benefits, your pension fund is safe and secure for your benefit regardless of what happens to your business.

Important things to remember

Saving for your future is in important part of financial planning, and it should be done as tax-efficiently as possible
As a business owner there are many schemes available to you with attractive features you can benefit from that are not available within a normal employee pension scheme
Pension contributions are one of the most tax efficient ways of doing this whether it be contributions paid by the business which qualify for corporation tax relief, or personal contributions which qualify for tax relief at your highest marginal rate
You can access your pension from the age of 55 and there are a number of different and flexible options available, including drawdown

As Independent Financial Advisers with access to the whole of the market, Tees Wealth is perfectly positioned to recommend you the most suitable arrangements according to your business needs and individual circumstances. If you would like an informal chat at no cost or obligation, please don’t hesitate to get in touch.

Life insurance explained: Term vs. Whole of Life

Posted on 25 June 202030 March 2025 by Sophie Soraf

If the Coronavirus pandemic has done anything, it has shown us that we never know what’s around the corner. So, while taking out life insurance might not be at the top of many people’s ‘to do’ list, it is arguably one of the most important financial products anybody can purchase.

Over the past few months, thousands of people have lost loved ones tragically and unexpectedly, pushing them into financial hardship at an already difficult time.

What is life insurance?

Life insurance is designed to pay out a lump sum to your family in the event of your death, enabling them to keep up mortgage payments, bills, childcare costs and whatever else is required to maintain the lifestyle they’re used to when they no longer have your income to support them. A payout from a life insurance policy could make the difference between your loved ones facing a financial struggle at a challenging and emotional time and being able to maintain a stable environment with the standard of living they enjoyed while you were still with them.

Do I need life insurance?

If you need convincing that life insurance is a good product to buy, then ask yourself this: if you were to die, how much money would your family need have to live on? How long would it be before they found themselves running short of money? If your income covers vital outgoings such as the rent or mortgage, bills, or grocery shopping, then taking out life insurance is an excellent decision.

Even if you aren’t the main breadwinner, however, you may still be making a contribution to your family that would be difficult (not to mention expensive) to replace if you were no longer here. You may for example, be the primary care giver for your children, providing housekeeping and other home-based services that are critical to your family’s wellbeing.

What is the difference between term and whole of life insurance?

Term and whole of life insurance are the two main types of life insurance available on the UK market. A term life insurance policy is designed to last for a certain period of time, called the ‘term’. It will only pay out if you pass away during the term of the policy. If the policyholder dies after the term has expired, the policy won’t pay out.

On the other hand, whole of life insurance does exactly what it says on the tin – it will pay out to your beneficiaries whenever you die, no matter when that is, because it is designed to last for your entire lifetime.

What are the advantages of term life insurance?

The main advantage of a term life insurance policy is that it is designed to be temporary. So, it can cover you while you have financial responsibilities such as a mortgage and children to take care of, but you can stop paying premiums once your children have grown up and moved out.

It can also be a cheaper option as there is less risk associated with it for the insurer. Term life insurance policies can therefore provide the maximum death benefit available for lower monthly premiums.

Term life insurance policies also tend to be simpler and a lot easier to understand than permanent policies. There tend to be fewer exclusions, hidden costs or risks to worry about later down the line.

What are the disadvantages of term life insurance?

Because term life insurance policies expire, you may have to take out another policy to cover you. However, because you will be older and will therefore be perceived to have more age-associated health risks, premiums for a new policy will increase the older you get. For example, taking out a policy in your 20s or 30s will be cheaper than if you were to take out a new policy in your 50s or 60s.

Term life insurance can also be more uncertain. You may pay premiums for the whole of the term for no benefit, if you outlive the policy period, while you may develop a health problem during your term that renders you uninsurable, making it difficult or impossible to take out a new policy once your term life insurance policy has expired.

What are the advantages of whole of life insurance?

Whole of life insurance has the obvious advantage of lasting for the policyholder’s lifetime, thus providing extra security by guaranteeing a payout to your beneficiaries, no matter when you die. However, there are also other benefits to be aware of.

Unlike a term policy, you won’t face having to find a new policy when your current one expires, so you will remain insured even as you get older or if you develop health conditions.

Some whole of life insurance policies also offer the unique advantage of allowing you to invest your premiums in stocks and shares, enabling you to grow your money depending on how the stock market performs.

What are the disadvantages of whole of life insurance?

The main disadvantage of whole of life insurance policies is the expense. Whole of life policy premiums can be many times more expensive than a term policy covering you for the same amount – this is because insurers know that they’ll have to pay out on your policy at some point, whereas they may never have to pay out on a term life insurance policy.

They are also more inflexible, and you may find the premiums more difficult to keep up with as you get older, retire and have less income to live on. If you mainly need life insurance to cover you while you have mortgage payments and dependants at home, then term insurance will be more suitable because you can cancel your policy once it’s no longer needed.

What type of life insurance is best for me?

This entirely depends on your personal circumstances and what you need the payout to cover.

One of the biggest selling points of whole of life insurance is that it can be used to help your family deal with an inheritance tax bill. These bills can really shoot up if the value of your estate exceeds the nil-rate band threshold of £325,000 and has to be paid before your beneficiaries are given access to your estate. As such, many families are forced to take out huge loans to cope with the cost, adding stress to this already heart-breaking time. It should be noted, however, that a whole of life insurance policy can only help your family in this way if it is written in trust – this means that the payout from your policy won’t be considered as part of your estate.

However, if you need life insurance to cover a particular period in your life where you have a lot of financial responsibilities, then term life insurance will be a cheaper, more flexible option that doesn’t leave you paying expensive premiums when you no longer need to.

At Tees we provide independent financial advice across a whole range of financial products, including life insurance. Working in partnership with you for the long term, we are always there when you need us.

If you need help choosing the right life insurance product for your needs, call us today.

This material is intended to be for information purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument.

Tees is a trading name of Tees Financial Limited which is regulated and authorised by the Financial Conduct Authority. Registered number 211314.

Tees Financial Limited is registered in England and Wales. Registered number 4342506.