Q. I have been told that I will not be eligible for the new pension rules due to come in from April 2015 as I am too young at 48. However there is apparently a way I can release funds from my pension through investing in certain schemes. Can you tell me more?
A. The new rules, effective from April 2015, open up the ability to legitimately access your full pension fund from age 55, subject to tax and some other restrictions on further contributions. However this does not appear to have stopped people trying to promote schemes supposedly allowing access earlier, or on better terms. The vast majority of such “liberation” schemes are scams, where the people promoting them will be long gone with the majority or even all of your pension fund by the time the tax bill arrives. The Pensions Regulator is trying to clamp down on these schemes, which often claim to have identified “legal loopholes”, “loan schemes” or some sort of investment enabling you to access your fund, or obtain high returns with little or no risk. In the vast majority of cases, it is not possible to access your fund before the age of 55. The exceptions are if you are terminally ill, or you have a historical contractual right to draw benefits from your existing scheme at an earlier age. In both these cases there is unlikely to be a necessity to transfer your fund, and if you do need help, you should ensure you are dealing with an adviser authorised and regulated by the Financial Conduct Authority, such as a firm of Chartered Financial Planners.
Q. I hold an investment in the Invesco Perpetual High Income fund which I have had for many years and I have been very pleased with the returns it has given me. I have made withdrawals from time to time but am still showing a healthy profit. I know that the fund manager Neil Woodford left the company earlier this year to set up his own fund management company. My concern is that I have read articles that a lot of investors are transferring from the old fund that he ran at Invesco Perpetual to his new CF Woodford Equity Income fund and I am in two minds what to do and what and what tax implications there may be if I decide to switch to his new fund?
A. First of all although Neil Woodford has an excellent track record in providing above average returns this cannot be guaranteed to happen in the future. As any adviser will tell you past performance is no guide to the future. As you will have experienced as a long term investor the old Invesco Perpetual fund he ran did fall in value at times. The Benchmark for his new fund is the FTSE All Share Index. In other words the aim of the fund is to at least match or preferably beat the performance of this index. Secondly you do not mention whether your existing Invesco Perpetual fund is held within what are now known as New ISA’s (NISA’s). If it is held within a NISA and as you say there good gains within the fund there are no tax implications if you decide to transfer. If on the other hand they are not held in a NISA with good profits there could be capital gains tax implications. As an individual you have a capital gains tax allowance of £11,000 in this tax year and any capital gains realised above this figure will be taxed at either 18% or 28% depending on your own tax situation. I suggest you should seek advice from a Chartered Independent Financial Adviser before taking any action.
Q. I have come across the term “boiler room scams” on a number of occasions. I don’t understand what this is referring to, so could you enlighten me please?
A. Effectively boiler rooms are businesses that use high pressure sales tactics to sell something that is supposed to be virtually guaranteed to provide you with a big profit. Usually they are selling worthless stock in unquoted companies or even ones that do not exist. They tend to cold call targets from publicly available shareholder lists and are usually based abroad outside of the jurisdiction of the Financial Conduct Authority. You may have seen or be aware of a recent film “The Wolf of Wall Street” which chronicled Jordan Belfort, and his meteoric rise to infamy as one of the most well known boiler room scams. It is perhaps worth remembering “if an opportunity sounds too good to be true, then it probably is”.
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
