Chapters Financial News

Most employees have an employment contract. Even many business owners have an employment contract, even if they wrote it themselves for their own limited company.

It's one of those documents that you read when you take on a new role, 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 the key milestones 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?

So what might you look out for?

Death in service cover

Do you have death in service cover from your employer? Does your partner? It's usually 3- or 4-times base salary as an example (which can amount to a fair amount of protection), but each employer can offer different terms, or simply not provide this benefit at all. If you do have this type of cover through your employer, does it have an end date that you can check?

What about sickness or medical issues?

If you fall ill and struggle to work, how long will your employer pay your salary? Is it just Statutory Sick Pay (SSP – now £96.85 per week)? If they offer more generous cover, what are the terms? An employer can't pay less than SSP, but they may offer contractual or occupational sick pay, which might give you full pay for a set number of weeks, then followed by a period of half pay, as an example.

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? Is there a moratorium period where you can't claim on pre-existing conditions and, if so, how long 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?

Pension benefits

Through workplace pension auto-enrolment, the minimum required contributions from both you and your employer have increased over time, with the current total minimum contribution at 8.0% gross pa of your qualifying earnings.

The pension values that are being accumulated do not die with you and can be passed on to whoever you nominate. Did you make a nomination when your current workplace pension started, and is it up to date? Likewise, are any deferred pension nominations reflective of your current circumstances? Most people accumulate a number of pensions over their working life, and the nominations you made back at the start of your career may well need updating, if not already achieved.

Benefits 'menu'

Rather than prescribing a benefits package to team members, some employers offer a range of options, and a menu to pick what you want to suit your needs within a prescribed budget. I believe this is originally an idea from America, and some organisations like this open programme of choice.

Summary

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 you reach your own life junctions.

Perhaps, when next you look into your personal filing, dust off those old documents 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

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