Money
Our experts
Q&A: Debts, mortgages and tax codes
John Husband runs the Money clinic for Saga Magazine and has been writing about business and personal finance for 40 years. John is on hand to answer your money queries. Here is a selection of your latest questions, which first appeared in the February 2008 edition of Saga Magazine:
Q. I became very ill several years ago and had to stop work. I'm now back in full-time work again but while I was off sick I ran up a lot of debt and got into arrears on loans and credit cards. I can't afford to meet the monthly repayments my creditors are demanding. Where can I get help?
A. Go and see the debt adviser at your local Citizens Advice Bureau. Alternatively, call the Consumer Credit Counselling Service on 0800 138 1111 or National Debtline on 0808 808 4000.
Q. I have a bond maturing shortly. Would it be wise of me to use some of the money to buy a pre-paid funeral? Where would I stand if the funeral firm went bust?
A. Some readers find that this gives them peace of mind because their loved ones need no longer worry about arranging the funeral and paying for it. I suggest you find out more about these plans first. Start by contacting the Funeral Planning Authority, which regulates member firms and ensures that customers’ money is safeguarded. Visit the funeralplanningauthority.com website or call 0845 601 9619. You can also get more information from the Financial Services Authority, fsa.gov.uk, 0845 606 1234 or Consumer Direct, consumerdirect.gov.uk or call 08454 04 05 06.
Q. Our son and daughter-in-law have a £50,000 mortgage. We have enough in savings to lend them the money which they could then repay without any interest. Are there any tax catches that would stop us doing that?
A. None at all, so long as you don’t need the interest on your savings. You should also draw up a formal contract in case of divorce, bankruptcy, parents requiring long-term care, inheritance tax, etc.
Q. I fear that our parents may eventually have to go into care. If they signed over their bungalow to us, would this prevent it being taken to pay for their care home fees?
A. There is no way that will wash with the authorities. If your parents are still living there, they will be regarded as the owners. On the plus side, if one of your parents had to go into care, they cannot take the bungalow while the spouse is still living there.
Q. I have a P tax code and my husband has a K code. Can you tell me what these codes mean?
A. The P code means you get the full age-related allowance for someone aged 65-74. V means you get that plus the full married couple’s allowance for couples aged under 75. The Y allowance means someone is getting the age-related allowance for those aged 75 or over. Your husband’s K allowance means his total deductions exceed his allowances. The most common code is L, which means you get the basic personal tax allowance.
Q. My stakeholder pension is currently worth only £16,000 and I intend to retire in 2010. As it is so small I want to take it all as cash under the “trivial pensions” rule. How can I make sure that it doesn’t exceed the trivial pensions limit by then?
A. The trivial pension limit will be £18,000 in 2010/11. If you put your pension into a cash fund it will earn only 4% or so yearly interest. So it should easily remain below that limit. It is understandable that you want to do this. If you can afford to, would you not be better off putting as much as you can afford into it to provide some sort of pension? You get tax relief on all your contributions. Either way, only a quarter of the fund can be taken as tax-free cash. The rest – whether taken as cash or pension income – will be subject to income tax.
Q. I have a civil service pension that has been frozen since I left to take a job in the private sector 10 years ago. Should I leave it there or transfer it to my present pension scheme?
A. It would almost certainly be a bad idea to transfer it, because civil service pensions will have guarantees that no private employer is likely to match. Instead, put what you can afford into your present scheme and pick up your civil service pension when you retire.
Q. I’m 57 and would like to make use of an equity release scheme to raise money from my house. Is this possible?
A. Yes, some schemes will accept applications from the over-55s. Talk to a specialist financial adviser, such as Saga.
Q. I have a son who has suffered a nervous breakdown and is incapable of handling large sums of money. I want to leave money in my will for him but don’t know how to go about it. What would you suggest?
A. The answer would be to put money in a trust for him and to appoint trustees to look after it. I suggest you consider whether you have any close relatives or friends who would make suitable trustees. Discuss this with the solicitor who will be drawing up your will.
* John Husband answers your personal finance questions every month in his ‘Money clinic’ column in Saga Magazine.
* Email John your personal finance questions at web.editor@saga.co.uk John's opinions are his own and for general information only. Always seek independent financial advice.
