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 firstname.lastname@example.org with your questions.
You can also read more on money and consumer issues on my own blog.
Q: In your BBC presentation today you spoke about the stockmarket falls over recent days and recommended that people with personal pensions and who are "close" to retirement should consider switching their pension fund into cash. How close is "close"? Should the switch be done say 5 years before the planned retirement date, or closer to the retirement date, say 2 or 3 years before? I shall be pleased to know your thoughts on this.
A: This is another one of these questions that has no right or wrong answer, only an answer that is best suited for your circumstances at the time. The benefit of moving your pension fund into cash before retirement is that any gains that you have made prior to the point that you switch will be protected. The downside is that any future gains due to the stockmarket rising will not be realised in full since you will no longer be invested. So it is very much a case of looking at the performance of your fund regularly and 'getting out' when you think the time is right - it might be that you decide to move into cash when your fund hits a certain value since you reckon that a fund that size will allow you to take an adequate income every year after retirement. So it might be that the timing is fund-size related rather than 'time' related, but whatever it is you should be in regular discussions with your advisor so that it is part of a well-planned strategy rather than a 'panic' move because you think the market in going to fall.
Q: My wife and I are both in our early 60`s both having retired last year. Our unmarried son aged 32, lives with us. We own our own home (worth about £175,000) and have about £100,000 in various investments. Our son works but is on minimum wage which means he cannot afford to move to his own home or even get married. How can we minimise any taxes that may be due if we both died suddenly? Secondly, how can we ensure we leave as much as possible to our son (especially our home) if again, we both died suddenly or if one or both of us ended up in care ? We obviously want to make any decisions fully within the law. Jeff Morgan.
A: As I said a few weeks ago when we discussed long term care, there is often confusion with the rules surrounding such care and those surrounding inheritance tax. From what you say in your email you would not have an inheritance tax problem since the assets that you mention are less than the amount you would need to leave before tax would have to be paid. So as far as I can see (and I am cautious only because you may have other assets that you have not mentioned, or there may be issues of which I am not aware) there would be no inheritance tax liability for your son on your deaths. Having said that if you suddenly give all of your assets to your son and then need care then the local authority could argue that you only gave the assets away to avoid having to pay for care and so you do need to be careful how you manage that transfer. I would suggest that you take some legal advice to find out how best to transfer assets into your son's name so that he can carry on living in your home (and his home) if something happens to you and/or your husband.
Q: Over the last few days there have been dire reports of 13 day of falls, billions wiped off stock values, and loads of doom. So what! Yes if you have to sell at this time it is unfortunate but surely any PRIVATE investor is or shhould be in it for the long term and not for speculation and short term gain. Unless of course you wish to play the marker but that carries an obvious risk. The dealers I am sure are the ones who are now operating in the Bear/Heifer market and as usual are taking advantage of the various falls and making money on stocks and shares that they do not have and are in a way causing some of the headlines we're seeing such as : "SPECULATION just to make a quick profit". Your comments please. Gordon M.
A: I would have to say that you are correct - that the stockmarket is, and will continue to be volatile and should only be used by investors who are using money that they are unlikely to need for a few years, and who won't be too concerned if the value of their investments fall in the short term. You are also correct when you say that there are a lot of speculators out there who are using falls in the market as an opportunity to make money since they can buy stock that they think is undervalued and sell it at a profit if and when the price rises again. It is a risky business and not for the faint-hearted but the market as it is creates the conditions for speculators to make money in these sorts of circumstances. You should only play that game if you are using money that you can afford to lose!
Q: If the estate of a deceased person is well above the inheritance tax limit and includes shares which have significantly increased in value since they were acquired - after selling the shares, are the proceeds of the shares first subject to capital gains tax on the profit gained and then the residue subject to inheritance tax, or is the full value of the proceeds of the shares subject to inheritance tax alone?
A: When a person dies their shares are revalued at the date of their death so it no longer matters what the deceased paid for them. Inheritance tax is paid on that date of death value irrespective of whether they're sold or not. If shares are then sold at a loss within a year of death, you can sometimes claim back some of the tax paid on the date of death values.