Advice & Guidance
Reena Wadia's Finance Tips
Share dealing is the process of buying and selling shares on a recognised stock exchange. In theory, the actual process of buying and selling shares is quite simple. Looking on the Internet or in the financial pages of the press, you will find lists of shares and the prices between which they are being bought and sold. You decide how much you are willing to pay for the shares and put in an offer. If the offer is accepted, you receive the shares and pay for them. Selling shares works the same way: you offer your shares for sale at a price and if someone accepts your offer, you receive payment and hand over any share certificates you have.
Although most people come across a Life Assurance Endowment policy as a means of repaying a mortgage, the policy is in fact a savings plan, the proceeds of which are used, on it reaching the end of its term, to repay the outstanding mortgage. It is not uncommon for endowments to be established purely as a method of saving for the long term.
It is generally accepted that retirement planning is about ensuring that you have sufficient financial resources to enjoy your retirement. Although most attention is placed on the provision of a pension, it is also wise to consider the timing of debt repayment to ensure the majority is repaid before you retire. This is especially important on any mortgage on your home.
Stake Holder Pensions
Stakeholder Pensions are a form of Personal Pension where certain conditions, laid down by the Government, must apply. These conditions relate to the maximum amount that the Pension Company may charge for the product, the minimum level of contribution they must accept and the abolition of a fixed frequency for your contributions.
Having successfully built up a pension fund during your working life, there will come a time when you will need to make some important decisions about how to use this fund. These decisions involve how you intend to draw your pension income to ensure the benefits best suit your needs in retirement. It is normal for people who are retiring to convert a portion of their pension fund into a tax-free lump sum with the balance used to purchase an annuity.
Most of us have heard of Life Assurance and appreciate that it is a policy provided by a Life Assurance Company that pays out either a lump sum or a series of payments if or when you die. These payments are normally paid without the deduction of any personal income tax, and in most instances are actually tax-free.
Critical Illness Insurance covers an individual for life or for a set period against a number of serious illnesses, diseases and medical conditions. It pays out a single tax-free lump sum on the diagnosis of one of the illnesses specified in the policy details.
The cornerstone of financial planning is income protection cover. This form of health insurance is designed to pay you an income in the event of you being unable to work due to sickness, injury or accident. The main benefit is that your standard of living can be maintained in the event of a claim. Any benefits are paid tax-free and continue until you return to work, retire or die, whichever is the earlier. The maximum you are allowed to insure is approximately 65% of your gross salary (net profit for self employed).
Private Medical Insurance (PMI) cover provides you with the option of private medical care in addition to the care provided by the National Health Service. You (or your employers) pay monthly or annual premiums, the cost of which is determined by your personal circumstances (e.g. sex, age, previous medical history) and the type of cover you choose. Premiums are reviewed each year.
A mortgage is the name given to a loan secured on property. It is usually used to buy the home although it is becoming more popular to consider a new mortgage, where the property is already owned, to access a more competitive mortgage product or to raise capital for other purposes, such as school fees or business investment.
Buildings Insurance covers loss or damage to the actual structure of your home. While Contents insurance covers the loss of your possessions it will not cover the generally higher value of your property. However this may depend on your policy. Your home needs separate cover and this is known as Buildings Insurance.