Unto us a new world order is given...

The last 12 months have been unsettling for financial consumers and professionals alike.

Just over one year ago Lehman Brothers had collapsed, propelling the global banking system into a crisis that very nearly saw cashpoints run dry, salaries go unpaid and business credit dry up completely.

Only massive intervention by political leaders prevented the global economy from plunging into a full-scale depression, although the cost of their emergency measures will be with us for years to come, especially once the winners of next year's general election begin to tackle the UK's vast budget deficit.

It appears that Wall Street's fictional monster Gordon Gekko got it wrong and greed is not good. And as another Gordon discovered, neither is it always fair nor desirable, nor does it serve the interests of the vast majority. A suitably seasonal thought that politicians will hopefully translate into a more secure global financial framework for all of us.

Although stockmarkets and many other asset classes have recovered strongly and house prices and consumer confidence are slowly rising, too many people have been affected by the downturn not to feel uncertain about what might lie in store for 2010.

Christmas gives most of us a moment to escape from our everyday concerns and is the perfect time to reflect on what is really important to us and our loved ones. Following the disturbing unpredictability in global financial markets and rising unemployment here in the UK, many ordinary people are now returning to basics when it comes to securing their financial future - saving more - whether for short/medium term needs or retirement, overpaying mortgages and making sure that their families would be protected in the event of sickness, accident or unemployment.

In this newsletter we will be discussing some of these issues but perhaps you should make a complete review of your financial planning arrangements with one of our advisers your top New Year's resolution for 2010. Holistic financial planning looks at the whole picture when considering your protection needs and when investing, there are often as many, if not more opportunities in stormy economic conditions as when everything is 'plain sailing'. If nothing else, the crisis reminds us that a thorough, pro-active approach to your financial planning is the best way to prepare for the future.

We would like to wish all our clients and their families a very enjoyable Christmas and New Year.

What protection do I need?

Those with poor employee benefits and the self-employed should view protection against accident, sickness and unemployment as a priority.

Even those well provided for by their current employer need to consider whether they could cover all their financial commitments if they were unable to work for a long period of time. With jobless numbers reported to have risen to an alarming 7.9% in the three months to August '09* there has understandably been increasing interest in protecting against unemployment in particular, while at the same time it may be becoming more difficult to find affordable unemployment cover.

It makes it harder than ever to research the appropriate protection for your own personal situation, but here are some of the key features of one of the commonest forms of income protection - Accident, Sickness and Unemployment cover, or ASU.  ASU cover can sometimes be confused with other forms of income protection which do not offer unemployment protection. An ASU policy is designed to make payments linked to your normal monthly income.

It might pay 50% of your pre-tax income up to a maximum of £1,500 each month, for example.

Typically the policy pays out for a maximum of 12-24 months or until you are able to return to work, if sooner. There is normally less need for underwriting or medical evidence when applying for cover, but pre-existing conditions will often not be covered, at least for a period of time.

Self-employed people qualify for unemployment cover if they satisfy certain conditions - for example they often need to have been continuously self-employed for a minimum of six months before applying and will need to have ceased trading before making a claim.

Employed people should also be aware that there is usually a fairly long period at the beginning of the policy when no unemployment claim can be made, during which time they should have had 'no reasonable knowledge' of possible redundancy.

These policies can provide valuable cover but it is very important that you understand exactly what protection is being provided. Let a specialist adviser guide you through all your income protection options and help to find a solution which is both affordable and suits your individual circumstances.

*Source: Office for National Statistics

"Thank you for the lovely present..."

Twenty-somethings could be forgiven for not concentrating too hard on providing for their retirement.

After all, they may well still be paying off a student loan, saving for the deposit on a home or just having far too good a time to worry about such a distant prospect. But there is a compelling reason why beginning to save for your retirement as early as possible could save an awful lot of additional retirement saving further down the line - and the reason is the powerful effect of compound interest.

Of course, compound interest's 'miracle effect' will apply to other investments - e.g. those held within an ISA.

However, for all the ISA's flexibility and tax advantages when the income is withdrawn, this form of long-term saving lacks some of the 'front-loaded' effect of the extra compound interest available on the tax relief within a pension. In truth, there are advantages to including both in your retirement plans.

This is not just of interest to working adults - beginning a pension plan on behalf of a child is an incredibly thoughtful (and tax-efficient) gift. Currently up to £3,600 can be invested annually in a child's pension plan.

Assuming you are a basic rate or non-tax payer, you would pay £2,880 of this and the remainder is paid into the plan by HMRC. One payment of £2,880 made when little Johnny is aged 10 would mean a pension pot worth £33,996 at age 55, or £55,992 at age 65, again assuming 5% growth per annum. Granted it may not be the most exciting present under the tree but one day (eventually) they'll thank you!

For a comprehensive review of all your retirement planning options please contact us.

Live long and prosper

The good news is that we are all living longer.

In fact, new research from the University of Southern Denmark indicates that over half of all children born in the last few years will live to over 100.

• Would you need to hire in help? 
• Would a serious critical illness prevent you from being able to pay your mortgage?

Critical illness cover pays out a tax-free lump sum on diagnosis of a specified illness and this will not only protect your finances at a difficult and stressful time, but can be used to help fund any changes which may be needed to maintain your lifestyle as a result.

A number of medical problems will be covered by the policy including seven 'core' conditions - cancer, coronary artery bypass, heart attack, kidney failure, major organ transplant, multiple sclerosis and stroke.

They will also pay out if a policyholder becomes permanently disabled as a result of injury or illness.

Arranging critical illness protection at a fixed premium when you are relatively young and healthy can make this vital protection much cheaper and easier to arrange than at a later date, while giving you peace of mind that you are protected from the financial consequences of major illness at any age. Talk to us about finding the right cover for you.

Safety first

Comprehensive Buildings and Contents insurance is always recommended and may be particularly important at Christmas time, according to research from the Royal Society for the Prevention of Accidents.

They point out that people are 50% more likely to die in a house fire at Christmas than at any other time of year*, due to a dangerous combination of candles, faulty fairy lights and tinderbox-dry Christmas trees.  When you buy a freehold property funded by a mortgage, you are normally obliged to take out home insurance at the same time. Your lender will want to ensure that the mortgage is protected should the property suffer damage, for example through fire, subsidence or natural disaster.