Archive for October, 2019

What Does Auto-Enrolment Mean For Employers?

Posted by Sam Binstead

While the law for automatic enrolment was first introduced for big businesses back in 2012, the truth is we’ve only just started to see the real impact of it. With 2018 being the deadline for all employers (of any shape and size) to not only offer a workplace pension but automatically enrol all employees into the scheme, this year is when the real effects have started to emerge, now that the dust has settled. Today, we want to look at what auto-enrolment has done for employers so far, and what you need to consider now that the pressure is off.

The Impact Of Auto-Enrolment

So we’re a few years into auto-enrolment for the bigger businesses, and at least 1 year into the process for smaller businesses, so now is a good time to look at how it’s all been going. For a start, the UK has added over 9 million individuals to the concept of workplace saving in the past 5 years – which is worth around £19.7bn in annual contributions – all thanks to auto enrolment. This is a phenomenal improvement for everyone involved.

On April 6th this year the minimum contributions required from both employers and employees went up, meeting the highest threshold so far. This means employees will benefit more from their workplace pension, and we are working more towards a comfortable retirement amount for many workers across the country. Pension opt-outs are still stable, with none of the big jumps predicted when auto-enrolment was brought in having happened. Overall, employees are happy, and around a quarter of employers are actually contributing more than the mandated minimum, without any financial burnout.

Cost

Take a look at what the cost would be to you in all of your existing employees opted to remain in the scheme. How much would you need to set aside to pay into it? How many of your internal resources would be needed to implement and manage the scheme with that many employees? Would you be better off outsourcing the implementation and ongoing management? Are there any other options available to you to help reduce the cost of implementation and continued administration? And do you know exactly how much you would need to pay out for each employee, and how much it will cost you all in all. Working out how much it will cost to offer pensions means you can work out if you can plan smarter and save your business money. If you’re not sure, your financial advisor can help you with this.

Your Employees

It’s important to remember that your employees don’t have to opt into the pension anymore – they are automatically enrolled in it as the default. However, they can choose to leave it at any time, so it’s up to you to make sure they are making the most informed decision possible, including understanding the benefits of the pensions scheme you’ve chosen. To do this you could stage a training day or circulate a flyer explaining the benefits to them. Consider also if any of your employees will lose ‘enhanced protection’ by being part of the scheme, and if so discuss this with them to make them aware of all of the options available to them. This should have been done when auto-enrolment first came into effect, but it is worth keeping the knowledge fresh and making sure that all new employees are brought up to speed as well.

What Do You Have To Pay?

Thankfully, the rules on this are very clear – there are set rules around the minimum that can be paid into the pension from both the employer and the employee, worked out as a percentage of the qualifying earnings of each employee. This means each payment will be different for each employee, depending on their salary and other earnings. At the time of writing, employers must contribute a minimum of 3%, while the employee need to make a contribution of 5%, giving you a total of 8% contribution. Of course, this is a minimum, and as an employer you can choose to pay in more. This can be a powerful incentive for your employees and even a great recruitment tool, so it’s worth considering if you can afford to pay in more.

Did You Rush Auto-Enrolment?

A lot of companies, particularly smaller ones, were taken by surprise by auto-enrolment. Before they knew it, their staging date was upon them, and they needed to get something in place sharpish. Other businesses stuck with their existing pensions schemes, without any updating or reflecting on whether they were the right for the business under the new regulations. Either way, there are still businesses out there that could be getting more from their pensions and giving their employees a better deal at the same time.

If you are a new employer who is struggling to understand their obligations for auto-enrolment, or you just need help getting everything set up, you are not alone. Many businesses are reaching out to advisors like us to help them understand the process of auto-enrolment and take care of the ongoing maintenance of actually administering your pensions. Planning and implementing in advance can actually save you a lot of time, hassle and money, along with knowing that the risks are much lower if something goes wrong. For more information about how Chilvester can make auto-enrolment a pain free experience for you, just get in touch with us today.

Brexit And Mortgages – What Will Happen Next?

Posted by Sam Binstead

As the deadline of October 31st draws even closer, the country seems to be holding its collective breath. Brexit negotiations seem have either stalled or be simply ‘spinning their wheels’, and the Prime minister is still resisting the idea of asking for another extension as much as he can. In short, it’s not a great time for British politics, and for those of us who are trying to plan for their future, it’s a time of huge uncertainty. There’s no doubt that a lot of different industries will be impacted by the change, and just one of them is the housing market. In particular, interest rates on mortgages are causing a lot of people concern.

What Will Brexit Mean For The Property Market

In the three years since the referendum, there has already been a fair amount of change in the property market, and a final decision is likely to cause more. The economic uncertainty caused by Brexit has caused house price growth to slow year-on-year, hitting an all-time low of just 0.1% in January 2019. Predictions by housing experts state that house prices could fall by around 6% in the event of a no deal Brexit, but could drop by as much as 20% in a worst-case scenario.

The number of sales completed has also been on the slow-down, with total numbers dropping even more in recent months as the deadline gets closer. And while there have been slight ripples of activity on the higher value properties, it seems that most people are keeping their ‘powder dry’ and just waiting to see what will happen. In the long term, commentators predict that the effects on the housing market of the UK’s departure from the EU remain just as uncertain as the shape of Brexit itself.

But even though the exact outcome is still unknown, we can make some educated guesses. For example, the interest rate on mortgages can only really go one of two ways, so we can look at some likely outcomes to both scenarios.

 If Interest Rates Rise

If interest rates increase after Brexit (whichever outcome we get) then it’s likely that mortgage rates would go up for those who are not on fixed rate mortgage deals as well.

This means that fixed rate mortgage payers will see no change, while those on variable rates would see increased payments in line with the rise in interest rates. If you’re on a variable rate mortgage and worried about rising interest rates in the near future, it might be time to talk to your provider about switching to a fixed-rate mortgage. However, you will need to consider this carefully, and check with your financial adviser first. While there are a lot of advantages to switching to fixed rate, you’ll need to weigh up the pros and cons. For example, there may be exit fees for you to pay if you move your mortgage before the end of your current deal, which might add up to more than you might pay if you stayed where you are.

Because a fixed-rate mortgage’s interest rate doesn’t change, this is possibly one of the safer options to choose at the moment if you’re nearing the end of your current deal, or if your mortgage provider will allow you to move without too many penalties.

 If They Fall

If interest rates fall, then this is generally considered good news all around. For those on variable rate mortgages, this means your payments would likely go down, and if you were looking for a mortgage for the first time, or ready to re-mortgage, then there would likely be some great deals available. In this scenario the fixed rate mortgage holders might lose out, because their rates would stay exactly the same and they wouldn’t get the advantage of the drop.

 So What Do We Know?

Unfortunately, just like our last blog about Brexit, the answer to that is still a firm ‘we don’t know’. No financial adviser has the power to predict the future, and with the political landscape in such a state of flux even those in the thick of it still don’t have a clear idea of what will happen and how it will all shake out.

What we can do is assure our customers that, whatever happens in housing and mortgage market next week, next month or next year, we are ready to adapt, and our partners in the market have plans in place. This means there’s absolutely no need to panic about your mortgage, or if anything will change. If you want to feel a bit more prepared, then you can always talk to us about your options and create a plan for both scenarios.

So for now, the best we can suggest our customers do is this. Put the newspaper down, turn off the TV and carry on as usual. Try not to let the incessant fearmongering get to you, and instead focus on preparing yourself and your family for the future you want. And if you have any questions, concerns or just want to talk through your options, we’re always happy to help. Just get in touch with the team today to book your free consultation.

The Lowdown On Professional Indemnity Insurance

Posted by Sam Binstead

If you’re a business owner, you’re probably aware that you need insurance of some kind. It largely depends on the industry you’re in – for some (like construction) insurance is mandatory, while in others it’s a bit more flexible. If you’ve looked into it before, you may have come across professional indemnity insurance. It’s one of the most common insurance types on the market and is an absolute must for any business in the professional services industry. Today, we want to go into what exactly professional indemnity insurance is, what it covers, and why your business might need it.

 What Is Professional Indemnity Insurance?

 Looking at the definition, professional indemnity insurance is a commercial policy designed to protect your business in the event that a client deems your work or advice inadequate. It’s pretty much only useful to people providing professional services or advice and can be used to prevent you and your business from losing money if you have to defend yourself against a claim, or settle one. After all, what can seem like small errors can be hugely expensive.

For example, you accidentally pass on confidential client data to the wrong email address, or you’re an architect and make a small mistake in designing a house extension, which then collapses. In both situations your client would have grounds to sue you, and any compensation payments will usually take into account the financial loss the client suffered due to your mistake. Professional indemnity insurance can help safeguard your business from financial harm while you defend and settle this kind of claim.

What Does It Cover?

 What your professional indemnity insurance covers will somewhat depend on what level of cover you choose, so we can’t say for certain that your policy will contain all of these things. However, most policies will cover a broad range of potential risks, including:

  • Legal costs of defending yourself against an allegation
  • Compensation
  • Client losses
  • Consequential loss
  • Unintentional defamation
  • Lost income

In short, professional indemnity insurance covers you in care you need to pay to correct a mistake, to to cover legal costs if you make an error in your work. As we mentioned previously, some things need to be specifically detailed in your policy, so you will need to check with your insurance provider to find out what your policy covers.

Do I Need Professional Indemnity Insurance?

 Well, do you provide professional advice or services to your clients? Then yes, you do need it! That should really be it, but for the sake of thoroughness, we should explain more.

There are many professions need to have professional indemnity insurance as part of their respective industry body’s regulatory requirements. For example, insurance brokers are required to have professional indemnity insurance to protect themselves and their clients. But even if you’re not obligated to have professional indemnity insurance, without it you could be liable for thousands of pounds worth of legal fees and compensation payments – not to mention lost income from time spent defending any allegation.

You’re likely to need professional indemnity insurance if:

  • You provide advice or professional services to your clients (including consulting or contracting).
  • You provide designs to your clients (such as working as an architect or design engineer).
  • You want to protect against allegations of mistakes or negligence in work you have undertaken for your client.
  • You work as a contractor, consultant, freelancer or self-employed professional, and your client has requested you arrange professional indemnity insurance in order to undertake a contract.
  • Your industry association/regulatory body requires you to have it.

If that sounds like you, then you probably need to chat to an expert and see where you stand.

At Chilvester Financial, we have expert business insurance advisers ready to help you with your professional indemnity insurance. We are on hand to help you work out exactly what level of cover you need, and which policies will be right for you and your profession. From making sure you have basic cover in place, through to helping you ensure you’re covered for every eventuality; we can arrange the right insurance for you and your business. If you would like to know more, just get in touch with us today.

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