Fergus Muirhead answers your consumer questions
I'm Fergus Muirhead and I'm here to answer any questions you may have about any money or consumer issues.
Please drop me a line here at email@example.com with your questions.
You can also read more on money and consumer issueson my own blog.
Q. I have a private pension which I can access now should I choose as I am 55. I have already received a quote with 2 options: a lump sum and annual pension or no lump sum with larger annual pension. Could I choose my own option by taking a small lump sum at present, and taking no annual pension until I wish to do so? I am currently unemployed as I was paid off last year and my jobseekers allowance is due to cease as of 12/3/12, which then I will be paid nothing as my wife is working. I have been employed since I was 15, and not used to being out of work, but I have a mortgage to pay, as why I thought of accessing my pension which I would rather have left until 65, but may not have any other option. Gordon Bell
A. You have a couple of options when you access the money you have built up in your pension and the one that is better for you will depend on the amount of money in your fund, and the amount of 'risk' you are prepared to take with it going forward. You can elect to buy an annuity - which is effectively an income for life - and before you do this you can take up to 25% of the value of your pension as a tax-free lump sum. Depending on the way your pension was set up you may be able to do this bit by bit, but you will have to talk to your pension company about this. Alternatively you can take your lump sum tax-free as described above and leave the rest of your fund invested, drawing an income from it that will be between £0 and an amount set by the Government and that is dependent on your age. The money left in your fund will increase or decrease depending on how will the underlying investment performs and this options is usually only recommend for larger pension funds.
Q. . I am about to receive some inheritance money and I was wandering what bank/building society or investment scheme would be best suited for it at the moment. Colin Wallace.
A. Very big question Colin and I would suggest that you take advice before deciding what to do. Some of the questions that you need to be asking before making a decision would include:
Will you be due to pay any tax on the money?
Do you have any debts that you could repay - loans or a mortgage?
Do you need an income from the money? If so how dependent will you be on that income?
Can you afford to lose some of it if you choose an investment that falls in value?
What is your tax position?
How long do you want to invest it for?
Would you be happy if it grows at 1% but can't fall in value, or 5% but it might also fall 5%?
Is there anything you would like to buy, or need to but, with it?
By no means an exhaustive list but if you consider the answers to some or all of these questions it might give you some clue as to the best home. Whichever route you choose you need to do your homework carefully and make sure that you are making your money work as well as it can for you, in as tax-efficient a way as possible.
Q. I recently became Power of Attorney on behalf of my dad who is elderly and gets confused. I took the document to his bank the other day so they could register it on his account. I was under the impression that doing this would mean that, in future, the bank will only deal with me as Power of Attorney. However, they have advised that if my dad was to go into the bank and ask to withdraw all his money, they would allow this as long as he had his bank card. Is this the case, as I'm surprised that he would be able to do this without my involvement? One of the main reasons I became his Power of Attorney was to safeguard against fraud. If my dad can withdraw his funds without my knowledge or consent, then what is the difference between the Power of Attorney and the Third Party Mandate which I already had? I'm not keen to "confiscate" his bank card!
A. If this is a continuing Power of Attorney and is registered with the Office of the Public Guardian then you should discuss this with someone more senior in the bank since you are correct, the very reason you has the power is to act for your father and maybe prevent him from acting erratically with his own money in his confusion. However by not removing his card, you are placing the bank in the difficult position of having to tell him he can't have access to his own account should he present himself, as well as increasing the risk of him being able to use it in an ATM, or even to pay doorstep scammers. You need to use your Power of Attorney authority to discontinue the authorised use of this card but this involves you having a potentially difficult conversation with your father.
Q. May I ask your advice about releasing equity in my home? I am a 64-year-old widow, I own my home and have no mortgage. It is currently valued at £450,000. I have one son who is a mechanical engineer. He will be 27 this year and has a good job with Clyde Pumps as a design engineer. I would like to release some equity in my home to give him a lump sum of perhaps £20,000 to enable him to get on the housing market in Glasgow. Would this be feasible? I do not wish to use my savings and all of my assets will eventually be given to him on my demise.
A. The very short answer is yes. You should be able to 'release' some of the cash tied up in your home to help your son. There are a couple of different ways to do this and you want to make sure that you choose the most appropriate one for you so take some advice from a suitably qualified mortgage adviser. This is becoming more popular these days as parents try to help their kids come to terms with increased restrictions on lending for first time buyers but just watch out for the costs involved. Some schemes won't charge you interest after you have borrowed the money - effectively the debt 'rolls-up' and is paid when your house is sold on your death but it may be better to pay interest as you go along, depending on your finances at the moment.