Situation
Matt is a 34 year old dentist, married with two children, Ben aged 4 and Alice aged 2. His wife Sue, two years younger and a nurse, is not working at present.
Matt has recently made the decision to leave NHS dentistry. His main concern is ensuring his family will be financially secure in the event of either his or Sue’s premature death.
Matt has been to his bank and has had a quote for £76 per month to protect him and Sue.
What We Did
Once we had calculated how much cover Matt and Sue would require on either death we obtained the level of cover he had from his “banked” 10 years with the NHS, and deducted this from this requirement.
The recommendation was:
- Purchase Pension Term Assurance for both himself and Sue – to age 55 for him and to age 50 for Sue. Age 55 for Matt was chosen as the children will have left home (hopefully he says) and his and Sue’s wealth should be secured by then. For Sue age 50 was chosen as Alice, the youngest child, will be 20 by then and more or less financially independent.
- This lump sum cover was augmented by putting in place a Family Income Benefit plan for both Matt and Sue that would pay a tax free monthly income to the surviving spouse. They decided to take this out over 15 years as Ben and Alice would be at university or working by then.
- The total premiums were £49 per month, after taking into account the tax relief available on the Pension Term Assurance premiums.
The Result
The family are protected with the correct level of cover, so that if the worst happens, they can still achieve their goals.
It also means that they are not spending inappropriate amounts on life cover, and instead use the spare money to for other purposes.
In addition, we would normally recommend that the policies are written in trust to ensure the beneficiaries receive their payout quickly and that the monies do not form part of their estate for inheritance tax reasons.
