What’s in your contract?02 November 2018
Most employees have an employment contract. Even many business owners/managers have an employment contract, even if they wrote it themselves for their own limited company.
It seems to be one of those documents that you read at the exciting time of securing new employment, it looked OK at the time, and you're sure you could find it in the filing if you needed to…if it hasn't been moved. But do you remember what it said, and what terms it offered if your circumstances changed?
Life changes for us all. I refer to them as life junctions, such as buying a home and taking on debt, getting married or entering into a civil partnership, redundancy, illness, additions to the family, death of a family member as examples. All significant, memorable and of course life changing. I hope you are ready for your journey, but importantly is your financial and protection planning ready?
What might you look out for?
Do you have death in service cover from your employer? Does your partner? It's usually 3 or 4 times base salary (which can amount to a fair amount of protection), but each employer can offer different terms, or simply not cover you. Plus, does this protection have an end date you can check?
If you fall ill and struggle to work, how long will your employer pay your salary? Is it just Statutory Sick Pay (now £92.05 per week)? If they offer more generous cover, what are the terms?
Through pensions auto-enrolment, contributions from both you and your employer are increasing over time, with the current total contribution position level at 5.0% gross pa of qualifying earnings, but rising to 8.0% gross pa from April 2019. These pension values that are being accumulated do not die with you and can be passed on to whoever you nominate. Who was that and is your nomination up to date? Likewise, are any old deferred pension nominations reflective of your current circumstances and needs?
Private Medical Insurance (sometimes known as PMI) is a taxable benefit offered by some employers. It can be a valuable addition to your overall package, but does it cover partners and children? Is there a policy excess if you have to make a claim and what is it? It is well worth checking to ensure that you have the cover that you need. And if your partner also has cover, is there a costly duplication occurring?
These are only examples of what to look out for, and one cornerstone of financial planning, which certainly won't be covered by your employment contract, is to make a will. Once made, keep it safe and up to date as your life and needs change.
Perhaps, when next you look into your personal filing, dust off that old contract and have a read of what protection you have already, either through your employment contract, or individual policies that you have, but also what protection you provide to your loved ones, and if you have a partner, what protection they offer you if your personal situation changes.
No individual advice is provided during the course of this blog.
Keith Churchouse FPFS
Director, CFP Chartered FCSI
Chartered Financial Planner
Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899