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Share and sacrifice

I work for a pretty generous employer and am told I have a decent package of flexible benefits. I am not sure whether I am making the most of it though. I am a higher-rate taxpayer and am married with two kids. What should I be doing?

Make sure you are making the most of employer pension contributions as many will match any contributions you make, up to a limit of course. Give some thought to your fund choice rather than simply opting for the default fund.

It is important to understand whether the pension scheme falls under the “occupational” or “personal” pension rules. A group stakeholder scheme, for example, would be classed as a personal pension and, as a higher-rate taxpayer, you would need to claim the higher-rate tax relief via your tax return. Many people are not aware of this and are missing out on substantial tax rebates.

Ask your employer if they offer either salary sacrifice or bonus sacrifice. If they do, and are willing to add some or all of the 12.8 per cent employer’s National Insurance saving, then this should be strongly considered.

Given a choice, I would recommend bonus sacrifice as this is less likely to have any impact on other salary-related benefits such as life insurance, income protection and possible redundancy packages.

Life insurance is often four times salary as standard but with the option to increase this very cost-effectively. Remember that if you leave the firm, you will lose the insurance. You could be in poor health at the time, so where you want to make sure that your family is well provided for in the event of death, it often makes sense to have some insurance outside of your employer scheme too, even though this will cost more.

With illness cover, you may have the option of buying income protection or critical-illness cover via the flexible benefits package.

Both are important if you are the main breadwinner and while cover is to some extent duplicated if you have both, via a benefits package, they tend to be pretty cheap. Again, this should not negate the need for a separate, personal policy.

Offering employees share option schemes is an increasingly popular way of giving workers a stake in the companies they work for. Most of these are a real no-brainer and almost everyone should join.

Save as you earn schemes offer huge upside potential with very minimal risk. Essentially, if the share price falls during the period, you will still get your savings back plus a tax-free bonus so the only risk is the fact that you could have received a slightly higher return through a conventional savings account. There is usually a fairly narrow window during which you can join the scheme so make sure that you do not miss out.

Share incentive plans allow employees to buy up to £1,500 worth of partnership shares from their gross salary and employers can give up to two matching shares for every share the employee buys. If you can afford it, pay in the full £1,500.

Other benefits might be the ability to buy extra holiday, childcare vouchers, home computers, medical insurance for the family, etc and it is up to you to decide which are the most appropriate for you.

Jason Witcombe is a director of Evolve Financial Planning


Consolidate with destiny

The reasons behind the FSA’s desire for IFA businesses to be better capitalised, for advisers to be better qualified and for initial commission to be consigned to history have already been commented on widely in the press. Implementation of these measures, in line with last year’s retail distribution review, will undoubtedly help to professionalise and raise the esteem of the IFA industry.

Bradford & Bingley writes off £500m

Former Bradford & Bingley chief executive Steven Crawshaw elected to receive a pension lump sum of £412,500 and a reduced pension of £105,318 a year. B&B has revealed mortgage write-offs of over £500m in its annual results.


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