PROTECTION AND YOUR FINANCIAL PLANNING CONVERSATIONS

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1 PROTECTION AND YOUR FINANCIAL PLANNING CONVERSATIONS

2 CONVERSATION STARTERS This information is for UK financial adviser use only and should not be distributed to, or relied upon by, any other person. While your clients will often focus on their investment strategies or their pension plans, their protection needs can be forgotten. But if they were to lose their income, how would they continue to finance these things? Protection should be the cornerstone of your conversation it can help ensure that they can maintain their financial goals no matter what happens.

3 Pension and investment conversation PROTECTING DREAMS AND ASPIRATIONS Having worked hard to build their savings, how would your clients feel if they had to start eating into these should they lose their income through illness. People save for things like a good retirement or to enjoy some of the finer things in life, they re not generally putting money away in case they need to maintain their lifestyle should something happen. So if they have protection in place, this will help ensure that their nest egg is used for what they planned for it. THE BANK OF MUM AND DAD OR ANY GENEROUS RELATIVE For many young adults today, leaving home to move into their own place requires support from the Bank of Mum and Dad. Parents, family and friends will put up a massive 6.5 billion this year to help their loved ones onto the property ladder.* Even where the Bank of Mum and Dad or other family members are not helping with a house purchase, they are often providing financial help for their children to rent. With rising house prices and other financial challenges, such as student debt, it s no surprise that parents, grandparents and other relatives and friends are providing more financial support. So the need for protection continues for families, even after their children have grown up and moved out of the family home. MAKE SURE THE RIGHT PEOPLE INHERIT AT THE RIGHT TIME Losing someone close is one of the most difficult experiences people go through. If they then have to wait on a grant of probate for a policy to pay out, this can add even further upset. If the policy is set up in trust, this should mean that there is no delay in receiving a payout. And with a trust, your clients can make sure that the people that they want to benefit, will do. This could be particularly important for co-habiting couples who haven t made wills in favour of each other intestacy law and welfare state working age bereavement benefits don t recognise co-habiting couples. PROTECTING BENEFICIARIES FROM IHT LIABILITY For clients who want to gift their money, they wouldn t want their beneficiaries to be hit with a big tax bill should they die in the seven years after making the gift. Setting up a menu plan could help with a potential inheritance tax (IHT) liability and help protect their legacy. Please note tax rules may change. Source: * Legal & General,

4 Pension and investment conversation PROTECTING DEATH IN SERVICE BENEFITS FROM THE TAXMAN Larger employers offering death in service benefits have historically chosen to provide this through a registered group life scheme alongside their occupational pension scheme. However as pension legislation applies to registered group life schemes, this means that payable benefits are assessed against the employee s lifetime allowance (LTA) and a tax charge of up to 55% will apply if the limit is breached. It s important to draw high earning clients attention to this issue, especially as, in 2016, the LTA reduced for the third time in four years to 1 million. Make sure they check the basis of any death in service provision with their employer. Source: gov.uk,

5 Pension and investment conversation HOW CAN SCOTTISH WIDOWS PROTECT HELP? Protecting their retirement and investment pots should be a priority for your clients. With our protection menu plan we can help you provide the cover they might need. Our menu plan can provide the flexibility to amend or add in additional protection due to changing circumstances. TOOLS When starting the conversation with your clients about protection you will often face objections. Our protection needs tool uses information about your clients personal finances, including their monthly pensions and investment payments, to calculate their potential need for protection. MENU PLAN Setting up a Critical Illness Cover policy on an income basis, rather than a lump sum, can help ensure that your clients continue to have an income should they become critically ill. This could help them to continue to meet any pension and investment contributions, without having to dip into their savings. Our Whole of Life Cover can be a practical solution for co-habitees and those who aren t in a position to give away sufficient wealth during their lifetime to escape an IHT liability on death. Having cover in place might provide funds to allow executors to pay any IHT due and obtain a grant of probate without having to borrow against the estate. And a Life Cover policy in trust can back up lifetime gifting by providing cover until potentially exempt transfers (PETs) or chargeable lifetime transfers (CLTs) drop out of account. Setting up a number of policies with different terms can help cover any potential IHT liability over 7 years. The sum assured would reduce each year in line with the reducing liabilities. For those employees who could be impacted by the reduction in the pension LTA, a Relevant Life Cover policy can be a suitable solution to allow an employer to set up life cover for an employee that is tax efficient, as long as the benefits are payable to an individual and cover ceases by age 75. This could also benefit those who choose to work longer. Premiums paid by the business are an allowable deduction against corporation tax, and there is no national insurance liability for either employee or employer. As this policy is typically set up as a discretionary trust established by the employer as settlor, the policy doesn t belong to the employee, so where a claim arises the proceeds should fall outside their estate for inheritance tax purposes. Please note tax rules may change. 3

6 Pension and investment conversation Our multi benefit quote and split sum assured functionality allows you to set up more than one cover in one quote, helping you to tailor the quote to meet all your clients protection needs. TRUST SUPPORT With our online trust support, you have access to a trust chooser and editable trust documents to help you choose the correct form and make it easier to complete. You can send us digital or paper copies of the signed trust forms. FURTHER CONVERSATIONS We send an annual plan summary to your clients, which you will also receive a copy of, to remind them of the valuable cover they have in place. This is an excellent opportunity to carry out a review with your client to make sure the cover they have still meets their needs. ADDITIONAL SUPPORT All our policies include our Scottish Widows Care service, which gives your clients more than just the financial protection they might need. Through our work with the independent nurse advisory service, RedArc, your clients and their families can get the practical advice and emotional support they might need during difficult and traumatic times in their lives. This support is available from the day their policy starts and for as long as they need it. Their team of personal nurse advisers are all highly experienced, registered nurses with a wide range of specialised and general medical knowledge. They offer your clients a flexible service that can be customised to suit exact requirements to give the personalised support required. Our protection policies are flexible and your clients can often adapt them during the term of their policy without having to cancel their existing cover first. Your clients also have guaranteed insurability options on their policy which allows them to increase their sum assured without further underwriting in certain circumstances, including for a promotion or salary increase. 4

7 FIND OUT MORE When talking to your clients about their financial planning needs, protection should be the cornerstone of this conversation. This can help ensure that all their financial objectives are protected. With the range of options we have available, we can help you provide the right solution. For more information on Scottish Widows Protect visit our dedicated adviser website. scottishwidows.co.uk/extranet/ products/protection

8 Scottish Widows Limited. Registered in England and Wales No Registered office in the United Kingdom at 25 Gresham Street, London EC2V 7HN. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Financial Services Register number /17