Q. I sometimes use my debit card when abroad to pay for unexpected purchases. When I do so I am often asked if I want to pay in local currency or sterling. I never know what to say and often ask the shop assistants advice, but they invariably say “it’s up to you”. What is the best option?
A. This is a more complex question than appears on the surface. The general rule of thumb is to pay in the local currency of the country you are visiting. If you pay in local currency your home bank does the conversion rate for you. If you pay in sterling you opt for “dynamic currency exchange” which allows the foreign bank (or the retailer’s bank) to do the currency conversion instead, often taking a tidy profit from the transaction. It is generally safer to allow your home bank to do the conversion. It is possible that by paying in the local currency you don’t get the best possible deal, but if that’s the case then there is usually only a small difference. If however you opt to pay in sterling and you have made the wrong choice the difference can be quite substantial. Therefore it is normally safer to pay in local currency.
Q. I am a member of a Final Salary Pension scheme, and I am due to retire in September at the age of 60. The scheme administrators have sent me a pack which refers to a “bridging” pension as part of my benefits. What is this?
A. A bridging pension is quite common in schemes which have a normal retirement age which is before the state pension age. The State pension is may eventually make up quite a large proportion of your income, but is obviously not payable until your state pension age. The bridging pension is a temporary supplement to your pension which is intended to create an overall retirement income which remains at the same level, and is sufficient to live on. The bridging pension will therefore cease when your state pension starts, at state pension age. This was probably age 65 when the scheme was being set up and the benefit structure being put together, but is now likely to be 66, or in the future 67. Because the state pension is also changing in structure, it is also possible that your overall income will not be a level amount, as by the time you get to state pension age you will receive a pension based on the new single tier state pension. The bridging pension is likely to be based on the old basic state pension, and would usually need you to have worked in the scheme for your full working life to get a bridging pension at the same level as the full state pension.
If you have a question you would like Trevor to answer, please email it to: yourmoney@rwpfg.co.uk or post it to Your Money, Rutherford Wilkinson Ltd, Northumbria House, 21-23 Brenkley Way, Blezard Business Park, Newcastle upon Tyne, NE13 6DS.
0191 217 3340
