How Well Protected Is Your Business?

To safeguard your business you have probably secured buildings insurance, machinery or equipment insurance and indemnity or public liability insurance. You may have covered the tangible assets of your business, but have you protected the most important assets: the people that directly contribute to your profits? Are your profits protected should you lose employees unexpectedly? How will your business profits be protected if you or your business partner is taken ill and can’t work?

If you run your own business, you probably have one or more key employees that are integral to its success. These are the people who possess the skills, knowledge, experience or leadership that makes a vital difference to your bottom line.

Does your business have a Sales Manager with an established network of contacts perhaps? Do you have highly skilled or technical staff? What about you, the director or business owner? Have you considered what would happen if they suddenly died, or suffered a critical illness that forced them to be absent from work for a long period of time?  Have you considered the costs and time implications associated with recruiting a locum or temporary contractor to fill the gap? What effect will their absence have on your business’s profits?

If the unexpected happened before you've had a chance to protect against such loss, your business would be at risk of collapse.

Q. What is Key Person Insurance? 

Key Person Insurance is a simple way for businesses making a profit to insure their business against the losses they might suffer as a result of the death, disability or critical illness of a key individual.

Q. My business is very small with fewer than ten staff. Do I need to be concerned with Key Person Insurance? 

Absolutely.  With a small business key people are more likely to be responsible for a larger proportion of the company’s profits. If the unexpected were to happen, then the impact for a small business would be dramatic and could have huge consequences financially.

Q. My business is larger with more Key People. What should I do? 

Large businesses should also consider Key Person Insurance. FTSE100 companies all insure their key people as part of their business continuity plan. Even though the impact of one person no longer coming to work wouldn’t be as financially disastrous for a very large firm, they still consider it vital to protect their profits.

Q. Is there any other cover I should be aware of to protect my business? 

Yes. As part of your business continuity planning you should consider shareholder protection and loan protection. These provide the business with cash to buy the shares of a deceased or seriously ill director, or repay a loan should the bank, for example, recall this on the death of a director. Whether you are a sole trader, partnership or a Limited Company, you must ensure that your business has the correct financial safeguards in place.

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With over 25 years of experience in helping people make their financial plans, Ewing Associates build strong trusted relationships with our clients. We offer an expert and friendly financial planning service.

Our experience covers personal and corporate financial advice. We fully understand the individual needs of every client and provide a first class service.

We will help you understand the numerous financial services available, tailor the right solution to your specific needs and help make your money work harder for YOU.

Ewing Associates’ services include mortgage advice, personal and corporate financial planning, investment advice and estate planning.

E-mail andrew@ewingassociates.co.uk or call 01480 357100 for more information

Fed up with low returns from Cash ISAs?

Cash ISA returns fell after the credit crunch, and at time of writing this you'll do well to find many which return over 3% annually.

So is there a way to make your savings work harder without risking your hard-earned capital during these economically unstable times?

Read on to find out.

The basics explained.

Since the introduction of Individual Savings Accounts (ISA) in the UK in 1999, there have been, broadly speaking, two types: Cash ISAs and Stocks & Shares ISAs.

Cash ISAs are similar to a bank account, apart from the tax treatment. Interest is not subject to income tax nor capital gains tax. Your deposit is as safe as if you had deposited it in an ordinary savings account and the returns are known, at least for the current tax year.

Stocks & Shares ISAs are an investment rather than a deposit. Again, your returns have a different tax treatment than outside of an ISA, but as with other investments, your capital is at risk. So you could end up with less than you invested. However, and this is the main attraction of investments, you could end up with far more than a Cash ISA would have returned. Therefore, they are really only suitable for those who understand and are happy with these risks.

Structured deposits

So, if you aren't happy to risk your capital by investing in a Stocks & Shares ISA and you aren't happy with with the relatively low (compared to years leading up to 2009) interest rate of Cash ISAs, where is the best place to deposit your savings?

What if you were offered the security of a bank deposit account whilst also having limited exposure to underlyings such as the FTSE100 and therefore potentially higher returns than a standard deposit account or Cash ISA? This is essentially a how a Structured Deposit works.

So, you could achieve returns of 6% per annum or more, and those returns are tax free. Sound too good to be true in this day and age? There are some restrictions of course, and an element of low risk.

The risk is that you may receive back only your original deposit at the end of term. Terms usually last 3, 5 or 6 years (although some schemes have paid out, or 'kicked-out' after just 1 year), so you need to be prepared to not make any withdrawals for a number of years. So, for example, if I transferred £10,000 today into a 5-year term structured deposit, I might receive only £10,000 back in 2018 - that is the worst case scenario (assuming our banks don't go the way Cyprus's have recently). If I left that sum in my bank's Cash ISA, it would have grown to £10,050 in 2018 based on the bank's current published rates. So I'm effectively risking £50 to try and get a better return.

So what are those better returns?

Each structured product provider offers different ways of indirectly exposing your money to the markets. These offers usually only have a window of a matter of weeks before they are replaced with different terms. For example, one may be designed to return 100% of any increase in the FTSE100 over a 5 year term e.g. if the FTSE has risen by 40% over 5 years, your balance will have grown by 40%. If the FTSE has fallen by 30%, you will have lost 30%..... except you won't of course! Because you are guaranteed to receive at least your original deposit back. Even though the FTSE may be 30% below its level  when you deposited your money, you don't lose any of your deposit.

To summarise, a structured deposit is deposit based and offers a defined return linked to one or more underlyings, such as the FTSE 100. Structured Deposits are designed to return at least the initial deposit by the end of the product life with any additional return linked to the movement of the underlying. Structured deposits can be held within a variety of tax wrappers such as a Cash ISA.

Where can I find out more about structured deposits?

If you are fed up with low savings and Cash ISA rates, or are just interested in finding out more about these products, have a word with your financial adviser, who should be able to help you find out if structured deposits might be the right place for some of your savings.

Government's Help to Buy Scheme - an Infographic

Here is an infographic from HM Treasury on the government's Help to Buy scheme