Money
Our experts
Q&A: investments, joint accounts, equity release, pensions, inheritance tax
Saga Magazine money expert John Husband answers your personal finance questions in his regular Money clinic Q&As:
Q: I have been given the chance to join a pension scheme at work which offers a choice of investments. How do I know what funds to invest in?
A: That will depend on your age and circumstances. As a general rule those investing in shares offer the best long-term return but the highest short-term risk. Cash funds offer lower returns and little risk. So if you are 10 years or more from retirement, share funds should prove the better choice. As you near retirement you should steadily move into cash funds to lock in past gains. I would suggest taking professional financial advice.
Q: I have seen reports in the press that people face all sorts of problems with joint accounts when one partner dies. My husband a O opened joint accounts on the understanding that this would make it easier for the surviving partner. Have we got it all wrong?
A: No, not at all. A joint account has th key advantage that the survivor can continue drawing on the account without delay. The balance in a joint account usually passes automatically to the survivor. Problems arise not on death but if one partner becomes mentally ill and unable to handle their affairs as the bank may put a block on the account to protect their interest. If there is any danger of this occurring, you may need to get a lasting power of attorney to look after your partner's interests.
Q: I have been thinking about investing in "ethical" funds. One was called very 'dark green'. What does that mean?
A: Ethical investments are ranked in terms of the strictness of their guidelines. Dark green means it follows a very strict ethical criteria. To find out more about ethical investments contact Ethical Investment Research: eiris.org or tel 0207 840 5700.
Q: Having contributed £2,400 to a 10-year life assurance policy I've just been told that it will pay out just £2,430. A £30 return over 10 years! Can be right?
A: I am afraid so. Life assurance policies are not a good way for older people to invest as a larger share of the premium goes to pay for life cover. Most policies have also generated poor returns over the past 10 years.
Q: I have a credit card which I am paying off slowly. What happens to the debt if I die before it is paid off?
A: Unfortunately your debts don't die with you. So if you die owing money on credit cards, mortgages, loans or overdrafts your creditors will have claims against your estate which will reduce the amount you can leave to loved ones.
Q: I am looking to take out equity release on my home to put a deposit on a house for my daughter. Is there any reason why I can't do this?
A: No. There is no restriction on how you use the money and many people are using these plans to help children and grandchildren buy their first home.
Q: We are considering an equity release plan but are worried that we cannot guarantee an inheritance to our children if we do. Is there anything we can do about that?
A: Many such plans now come with the option to guarantee that part of the value is protected for exactly that reason. Talk to an IFA who specialises in these plans.
Q: I had a car for just a month and had paid the first month's insurance when it was badly vandalised and written off by the insurer. I have received a payout, less the excess, but they are now asking me for a further 11 months' premiums. Can this be correct?
A: Yes. Home and car insurance are annual policies with the full premium due at the start. If you pay by instalment you still owe the full yearly premium even if your car is written off or your house falls down in the first month. If you get another car, the policy should cover it for the rest of the year, subject to adjustment if it's a different make, model or age.
Q: I have a personal pension and now that I am approaching retirement, I am considering taking an income from my fund. Is now a good time to act?
A: Annuity rates are at a three-year high, so this could be a good time to start investigating your options.
Q: My pension is more than I need. I could afford to give £100 a month to my grandchildren. If I do that would they be hit with inheritance tax?
A: Gifts from normal expenditure are exempt provided they are from income, such as your pension, and do not materially affect your standard of living. There is no limit to the amount that that can be exempt under this rule. Such gifts should be "regular" but can also cover one-offs which are "regular", such as making gifts to grandchildren on their 18th birthday. For serious avoidance of inheritance tax you need to consult an independent financial adviser.
* John Husband's answers represent his own opinions and are for general information only. Always seek independent financial advice. Email John your personal finance questions at web.editor@saga.co.uk
