Q. I have been watching with interest the developments in cashing in pensions since the budget in March. I know that more flexibility is coming from April next year, but I have a number of small pensions and a colleague of mine has suggested that it is possible to cash in up to £60,000 now. This seems like a lot to me, so can you explain how this is possible, if in fact it is?
A. Your colleague is referring to the changes in two sets of rules, firstly the Small Pots rules and secondly the Triviality rules. It is possible to cash in up to three Small Pots of up to £10,000 each. In addition to this, under Triviality rules you are allowed to cash in any further funds of up to £30,000 if this is the only pension (other than your state pension) that you have left. So in theory someone could cash in up to £60,000 in this way, but it is very unlikely that their pension savings would be split in such a way. You must be over age 60 to be eligible for the Small Pots or Triviality rules and if you qualify the first 25% is tax free with the balance being taxed at your marginal rate of tax.
Of course, just because you can cash in certain pensions, doesn’t necessarily mean that is the right thing to do. You should always take advice from a suitably qualified financial planner before making such important decisions.
Q. My wife and I are both in our 70’s and whilst I have a full State Pension my wife’s State Pension is much less than mine as she “mistakenly” elected to pay the small National Insurance stamp for a number of years when married women were allowed to do so. I also have some private pensions and I know exactly what percentage of these my wife would continue to receive in the event of my death. What I am unsure about is will my wife qualify for any of my State Pension if I were to die first?
A. Your State Pension will die with you, but all may not be lost. As your wife is already in receipt of her State Pension she may be able to increase her basic State Pension by using your qualifying years as she doesn’t already get the full amount. You could get further information by contacting the Pension Service. Based on your postcode the office that you should write to or phone for information is – The Pension Service 6, Mail Handling Site A, Wolverhampton WV98 1AJ. Phone number 0845 6060265.
Q. I have a cash ISA which recently matured, but I am struggling to find a decent interest rate to roll it over to. I have heard that it is now possible to switch to a stocks and shares ISA with this money, would this help me get a better return?
A. Yes it is now possible to switch to a stocks & shares ISA from a cash ISA, but not the other way round. However from July the “New ISA” will replace the old system, and it will be able to switch either way. Whilst investment funds offer the potential for greater returns in the longer term, they also carry extra risk, meaning that you should only consider this option if you are comfortable with your capital being at risk. If you are likely to require access in the short term (before 5 years) then the greater security but lower returns of cash ISAs are likely to be the best option. I suggest you consult an independent financial adviser to discuss your attitude to risk, and your capacity for loss.
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
