The Financial News You Need To Know with Sarah Pennells – January 28 2016

Sarah Pennells is a personal finance journalist and the face behind SavvyWoman.co.uk. We think she does a great job at explaining financial subjects in a very clear and accessible manner. You can find her column below where she writes about the latest financial news, and helps you get more from your money.

What is a bear market?

Bulls, bears…sounds more like a zoo than a stock exchange. If you’re baffled by the talk of large, hairy animals supposedly affecting the value of pensions and investments, you’re not alone!

The financial industry loves a good bit of jargon, especially – it seems – anyone involved in investing. A bear market is one that has fallen by at least 20% from its recent high. It’s also a market where investors believe that it’s likely to fall further, rather than one that’s fallen sharply and bounced back within a couple of weeks.

In fact, in the UK only the FTSE 100 index, which represents the 100 biggest companies listed on the London stock exchange, fell by 20% since April last year (and as I write this, it’s higher than it was last week). The FTSE 250 index, which represents the next 250 biggest companies, fell by much less than 20% over the same period.

Why does this matter? Well, if you have money in a stocks and shares ISA, a personal or workplace pension (apart from a final salary one) or have shares through a privatisation or windfall, your investments could fall in value – and sharply.

But don’t panic! Unless you need to cash in your investment in the near future, you won’t be affected in the same way. The worst thing to do is to cash in your investments in a panic after the stock market has fallen because that’s a sure-fire way to lose money.

SAVVY TIP: If you are able to withstand the ups and downs of the stock market and your money is invested for the longer term, the best thing is to stick with it. If you need to get to your money, take advice if you can about the best way to go about it.

One in five home insurance claims rejected

Almost 80% of claims on home insurance are paid out, but that still means that one in five are rejected. That’s according to new figures from the Association of British Insurers (ABI), which represents the large home insurance providers.

By contrast, almost all car insurance claims (99%) were paid out and almost nine out of ten (87%) travel insurance claims. The three main reasons why insurers refused to pay out home insurance claims were:

  • The claim amount was below the excess, which is the first part of any claim you have to pay. Excess levels vary widely between policies and can be as little as £50 and as much as £1,000 (or more). Policies generally have a compulsory excess, and you can choose to increase the excess to reduce your premium. Insurers may charge a higher excess for certain types of claim, such as flooding, subsidence or water damage (caused by burst pipes or a faulty boiler, for example).
  • The claim was for accidental damage, which was not included in the policy. Although many insurance policies offer accidental damage, some charge extra for it.
  • The claim was for something that the insurer thought was wear and tear. Home insurance is only designed to pay out for unpredictable events, such as flooding, burglary and fire. Unfortunately, unless you check your home regularly, you may not realise that, for example, roof tiles have become loose or that there are other issues that could leave it at risk of water damage.

SAVVY TIP: If you’re shopping around for insurance, don’t just buy the cheapest policy – especially for something like home or travel insurance where what’s included can be quite complicated. Read the policy documents, which are on the insurer’s website, before you take out a policy. Or take advice from a broker about the best policy for you.

Paws before you buy pet cover (sorry!)

If you have a beloved dog or cat, you might have thought about taking out pet insurance. Around three and a half million pets in the UK now have insurance, and insurers pay out the equivalent of £1.65 million a day in claims.

Pet insurance can start at approximately £5 a month for a cat, but you can pay nearer to £50 a month for full cover for a dog, depending on the breed.

However, not all policies are the same (of course!) and some offer a much higher level of cover than others. The main thing to think about is whether or not you want cover for your pet for life. That’s not the same as taking out insurance to last the life of your pet. ‘Cover for life’ means that the insurance policy will continue to insure your pet for illnesses that it’s developed since it was originally insured.

Most policies will either pay out a maximum amount over a 12-month period, or will pay out a maximum for each condition you claim for. But, when you come to renew your insurance that illness is excluded, meaning that you can’t claim for it if it were to flare up or get worse in the future.

SAVVY TIP: Cover for life policies give the most comprehensive insurance, but the premiums are more than other policies, and can be significantly more.

If you don’t have insurance, or don’t want to take out a pet insurance policy, build up a savings fund if you can, so you can pay for treatment that your pet needs.

Couples pay ‘living together’ penalty

You might think that if you live with your partner, you get similar rights than if you were married. But you don’t. In fact, you get very few rights at all.  New research shows that couples who live together miss out on a range of benefits if one partner dies. And couples also miss out on tax breaks that married couples and those in a civil partnership can claim.

Getting married to save tax may not be the answer (certainly not the most romantic one!) but it’s worth being aware of the fact you have fewer rights if you cohabit.

SAVVY TIP: Many couples mistakenly think that one partner automatically has rights to a property they’ve lived together in, but that’s not the case. Couples also don’t have an automatic right to inherit from each other if they live together and die without a will.

Tick tock…

Only a few days until the self-assessment tax return deadline. If you really have left it until the last minute, don’t ignore the problem! The best option is to pay the tax you think you owe and file your tax return.

If you have a genuine reason for not being able to file, tell HM Revenue and Customs. But beware that you’ll incur a £100 penalty if you don’t send in your self-assessment tax return on time, and you’ll have to pay an extra 5% of the tax you owe if it’s more than 30 days late.

SAVVY TIP: Whatever you do, make sure you file it and pay the tax you owe by the end of April. If you don’t, you could be charged a penalty of £10 a day for up to 90 days. Eek!