Q. I am almost 70 and have been a widow for over 20 years. One of my sons is living and working in the Republic of Ireland near Dublin and I am considering selling my house in England and buying a house near to where he lives. I am in no rush but am currently weighing up all the advantages and disadvantages, such as leaving all the friends where I currently live. From a financial point of view can you advise if my state pension will be affected if I move to the Republic of Ireland?
A. Your State Pension will not be affected. It will continue to be paid into your designated bank either in the UK or in the Republic of Ireland. It will also continue to benefit from the annual increases given each year. This is not always the case. For example people who emigrate to certain countries such as Australia where they would continue to receive their State Pension but they do not receive any future increases at all to the pension. This would mean that their State Pension would be dramatically eroded by inflation as the years go by. What will affect anyone living abroad is the exchange rate between the Pound and the currency where you live. In your case it would be the exchange rate between the Pound and the Euro. Depending on which way the Euro moves against the pound you could be better or worse off.
Q. I have heard about investments called Contracts for Difference. Can you explain what they are?
A. In finance, a contract for difference (CFD) is a contract between two parties, typically described as “buyer” and “seller”, stipulating that the seller will pay to the buyer the difference between the current value of an asset and its value at contract time (If the difference is negative, then the buyer pays instead to the seller). In effect CFDs are financial derivatives, that allow traders to take advantage of prices moving up (long positions) or prices moving down (short positions) on underlying financial instruments and are often used to speculate on those markets.
For example, when applied to equities, such a contract is an equity derivative that allows traders to speculate on share price movements, without the need for ownership of the underlying shares.
CFDs are very speculative investments and therefore not normally suitable for private investors.
Q. I am taking a mortgage and would like to protect my family in case of my death. What is the cheapest type of life insurance to take?
A. Life insurance policies come in many different forms and associated costs. The most cost effective is likely to be a Mortgage Protection Policy which is decreasing term assurance which gives temporary cover for the length of the mortgage with the cover reducing as the mortgage is repaid. The insurance company assumes an average interest rate for the mortgage to work out what the policy is worth each year. It may be slightly out with the reality which means the death benefit may be slightly more or less than the mortgage at any one time. I strongly recommend that you discuss your options with an independent financial adviser as there are other types of life insurance products that are available which may be more appropriate for you and there are various options including critical illness cover which may be appropriate in your circumstances.
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
