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.
I'll be dealing with a selection of your queries every other Wednesday on Scotland Live, on Reporting Scotland and here on the BBC Scotland news website.
Please drop me a line here at email@example.com with your questions.
You can also read more on money and consumer issues on my own blog.
Q. About four years ago, my financial advisor recommended I move a £15,000 Standard Life Pension to Norwich Union Commercial Prop Fund who as you know is now Aviva. This has fallen in value over the period and my most recent statement of January 2011 placed the Total Fund Value and Transfer Value at £12,709.47. I am being charged £10 plus per month admin fee. Would you recommend I move this money or hope that the property market revives itself in the near to long term.
A. It's a difficult one Ken, and not helped because I know so little about you and your circumstances. So everything I say is based on the limited information you provided. As you know the commercial property sector has not had a good time and so your investment has dropped by £2,500 or so in the last four years. I'm not sure why you moved the pension in the first place, unless the Norwich Union commercial Property Fund was doing something no other funds were doing at the time. And I also don't know whether when you ask about 'moving', you mean moving to a different pension company or to a different fund within your Aviva pension. Let's deal with the move to a different company first. The fund value and transfer value are the same which suggests that you wouldn't be penalised for moving from Aviva unless there was a specific exit penalty from the property fund - and you would need to check this with Aviva. Any other pension that you move to will have annual charges - and you would need to do a comparison to see how they fare against the charges you mention above. I don't think you would save much by pursuing this course of action. You may want to look at the other funds in the Aviva range and see if there is one that matches the amount of risk you are prepared to take, and that you feel might grow a bit faster, to make up your deficit. But what goes up might also go further down and unless you choose wisely you might end up losing even more money. It might be good to sit tight and hope for a recovery in the commercial property market.
Q. I have looked at numerous ways of releasing money against the value of my house, and I am not sure which to go. The present day value is placed at £140,000. I have been told that if I wanted to buy a new car, the total released would be approx. £40,000. What I didn't like was the terms attached to this transaction. What kind of advice can you give in a situation of this kind?
A. You don't say what it is that you don't like about the terms of the scheme you have been looking at, but on the basis that the total release you are looking at is about 30% of the property value I am assuming it is some sort of Equity Release Scheme. These schemes allow you to "take" money tied up in your property and use it for something else, in your case perhaps a car. You can either pay interest on the money you have borrowed as you go along with the £40,000 you owe paid from your estate when you die or have to sell your house, or you can "roll-up" the interest and it can be paid on death or sale - but you will obviously owe a much larger amount of money depending on how long you live. If these schemes don't appeal to you for whatever reason, then you could look at a straightforward re-mortgage or perhaps a car loan may be a better bet. In this way the money you borrow can be cleared off over a specific period of time.
Q. My wife and I are joint holders of a With Profits Bond with Liverpool Victoria which we purchased on 23 April 2002 for £10,000. At the end of the 9th Year this was worth a miserable £13,095.80 but with market value reduction I would only have received £11,759.52 had I cashed it then. At the 10th anniversary I can receive full payment without any market value reduction. However I am led to believe that Income Tax will be payable on the Profits portion of this Bond. Is this correct? If so is there any way I can minimize such outlay on what is after all a deplorable return. My wife does not pay tax and her portion of the profits will not put her over her allowance before tax but I pay tax at the standard rate.
A. If it is a With Profit Bond then there may well be a tax liability on any profit that is made when you cash it in. Technically you may be creating a "chargeable event" that could lead to a liability to tax. But it is unlikely to mean an increased tax bill for you unless the gain, when added to your taxable income for the year, takes you into a higher rate tax bracket. It's maybe worth pointing out the meaning of a "market value reduction" in connection with these with profit policies - since it may affect others in a similar situation. If you want to take your money out of a with profit fund at a time that doesn't suit the insurance company then they may well reduce the value of your fund, and hence the amount of money you can take out, by means of what they call a "market value reduction". They will argue that it is to protect the investors who do not wish to cash in their funds. But you should be aware that it can have an impact on the money available to you.