Newspaper article The Journal (Newcastle, England)

Your Money

Newspaper article The Journal (Newcastle, England)

Your Money

Article excerpt

Your money queries are answered by Trevor Clark, Director of Rutherford Wilkinson Ltd, Chartered Financial Planners Q. My partner and I, who are both in our 20s, have two young children, aged six and four. My partner has a salary of PS28,000 per year, and I currently look after the children. He has life cover through work which pays out four times his salary. Is this enough? A. This is one of those questions where there are a number of issues which need to be considered.

Firstly, you need to think about what liabilities would need to be paid, such as mortgage and loans, which would need a capital sum.

Then you need to consider what income you would need.

The most cost-effective cover to generate income until children have grown up is called Family Income benefit, which pays an income for the remainder of the policy term. You should also consider what cover is needed on your own life.

Would your partner be able to work if you were not there to look after the children? The costs of replacing a stay-athome mother with a nanny, cleaner, after-school clubs etc are substantial.

A 20-year policy paying out PS20,000 per year for a 28-year-old non-smoker could cost less than PS10 per month.

Finally, you should ensure the policies are written in trust, to make sure they pay out to the right people (unmarried partners are not recognised under the rules of intestacy). The trustees of the work-based plan have discretion over who they will pay the benefit to, and will often consider an "expression of wishes" left by the member, so it is important to ensure this is up to date.

You should also consider writing wills. As well as the financial issues around who inherits your estate, and the rules of intestacy, importantly a will allows you to appoint who you want to look after your children if you were both to die.

Q. I have a PS60,000 personal pension fund. I am 58 and still working. I have heard that from next April I will be able to draw my fund in full if I wish, and I am tempted by having access to this money. Is this a good idea? A. Firstly, I must point out that I do not have enough information to give you individual advice. However the new pension freedom which has been announced has caused many people to take another look at pensions. The idea behind the changes is that people should have greater flexibility to control their own money, rather than being forced to tie their fund up in an annuity.

The danger is that the fund will be gone before you finish needing to rely on it, and you will be left with too little income later in your retirement. …

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