Fergus Muirhead answers your money questions
I'm Fergus Muirhead and I'm trying to answer any money or consumer problems you may be facing at the moment.
You can contact me by e-mail at email@example.com
I will deal with a selection of your e-mails every second Wednesday on lunchtime Reporting Scotland, Scotland Live and on the BBC Scotland news website.
Q. I have a private pension pot of just over £100,000 which I made paid up on my 60th birthday last September. I have my State Pension and a modest NHS Pension. I am still working, self employed and part-time, and plan to continue working until April 2012. I am managing on my current income but with the past falls in pension values and future pension regulation uncertainties I don't know whether it is better to sit tight till 2012 or do something with the fund now. I am female have no dependants and no health problems. Liz Ramsay
A. Depending on your pension provider you should be able to move the money that is in your fund to something 'safe' that will protect it against falls in the stock market between now and the point at which you want to retire. Of course if you do this you will lose any of the 'upside' if the market actually rises during the next two years. It's really a question of sitting down and assessing how much income your personal pension is going to provide against how much you are likely to need and then look at how much risk you are comfortable with between now and April 2012.
Q. I am an airline pilot and I have a group personal pension with Aegon with my current employer. I used to work with Aer Lingus and also have a pension there which I think is a final salary pension. I don't pay into the Aer Lingus pension anymore since I left in 2002 but I know its still there and about a year ago I got a valuation of it of around 14k euro. I have been wondering about taking the pension away from Aer Lingus and putting it into a SIPP or another personal pension, but when I talk to people about it they all tell me to leave it with Aer Lingus as the final salary pension is a better deal. Can you tell me why this is the best place for it? Malcolm Clark
A. The reason that leaving your money in a final salary scheme is usually a better option is because of the guarantees involved. A final salary scheme pension is based on the number of years you were a member of your employer's pension scheme and the pensionable salary at the point you left. That figure is determined at the point at which you leave and may increase between then and retirement depending on scheme rules. If you take a 'transfer out' to a personal arrangement then your pension will be subject to the vagaries of the inv4stment market, or held in some sort of cash account as described above, neither of which are likely to match the pension available from your final salary scheme, although I know nothing of your age or salary details.
Q. I'm currently unemployed and soon to be divorced and have three company pensions from previous employers with pension funds as follows: Company 1:- £25,000, Company 2:- £7,500, Company 3:- £2,000. My wife has substantially more funds in her three pensions to the tune of £20,000 to which I am entitled to half of the difference i.e. £10,000. This will likely involve a pension transfer from one of her funds to mine to the tune of £10,000. My questions to you are as follows: 1. Can I nominate any of my company pensions to receive the £10,000 pension transfer; if so what one would be the best? 2. Can I use this sum to open a private pension or does it need to go into one of my existing pension accounts? 3. Can I ask for sum i.e. £10,000 to be paid to me in cash rather than put it in a pension fund? Paul Rooney
A. I think it's easier to answer the last question first. The simple answer is no, unless you are at least 55 years old, in which case you are entitled to take up to 25% of a personal pension fund as tax free cash. If you are younger then you will have to leave it in a pension until you reach 55. As far as your first two questions are concerned it depends on how you are going to deal with your pensions - are you going to 'share' them or 'split' them, and I don't have enough information from you to be specific. In general you should be able to nominate which of your funds receives the £10,000 and you should be able to set up a personal pension rather than add it to one of the existing schemes but it all depends on the exact circumstances of your settlement and I don't know enough to be any more specific at this stage.
Q. Can you give me any advice please? I have sold my house for a lot of money. My pension is tiny so I am looking to make the most of my capital. At the moment it is sitting in an easy access saver account at 1%. Inflation is reputed to be 5%. I am 63 years old, so need both income and capital inflation proofing so that I am not left in my old age with "tuppence ha'penny". This must be a common plea but it is heartfelt and rather urgent. Do I put it into a bank saver account, buy shares, or what? Are there any other savings which are inflation proofed? It seems the government is expecting high inflation as they have mentioned a 35% rise in house prices over the next five years, and have de- inflation proofed public sector pensions, tying them in with the RPI instead. Help!!! Barbara Milligan
A. This is an interesting question because it raises the issue that 'retirement income' and 'pensions' may not always be the same thing. You have cash that you want to use to provide an income in retirement but it has come from the proceeds of a house sale rather than something called a 'pension plan'. The only difference for you is that you could access all of your cash at any time whereas with a pension plan you get tax benefits on the way in and out but you have restricted access to your money.
The process for you should start with you calculating how much of an income you need and then look at what sort of growth rate is needed to produce that rate out of capital, and how much risk you would have to take to achieve that growth - for example shares may produce a higher rate of return that a bank account but you may lose more as well. It may be that the money you need can be produced from growth, or it may be that you need to eat into the capital as well on a year by year basis and you would then need to look at the most tax efficient way to do that. So the starting point is not 'what should I do with my money' but 'what do I need my money to do for me'!