Q. I will be leaving my current employment at the end of July this year. I have been with the company for a while and have been contributing to a Save As You Earn Scheme (SAYE). Will I still be able to do so after my employment ends?
A. If, before you complete your SAYE contract, you leave the company because of injury or disability, or you are made redundant, or you retire on reaching the retirement age which has been set for the purposes of the share option scheme you have joined, or you have to retire at any other age under the terms of your employment, you will normally have six months in which to exercise your option to buy as many shares as the proceeds of your SAYE contract, including any interest, will allow. You cannot use any other money to buy shares through the option scheme. If you leave for any other reason, some schemes may also allow you to exercise your option within six months of leaving. In this case you must normally have held your option for three years. Again, you cannot buy more shares than the proceeds of your SAYE contract, including any interest, allow. I recommend you ask your employer to clarify the situation for you.
Q. My husband died in 2004. How will this affect my state pension when I receive it. I am 42 now?
A. This depends on a number of factors, and is complicated somewhat by the changes planned to the state pension in 2016. If the changes go ahead as planned, your pension will be based on the number of NI credits you have at retirement, with 35 required for a full pension. If you are short of credits you may be able to use some of your husband’s credits to make up the shortfall. There will also be an increase made to take account of any benefits in the second tier state pension, and here you may be able to inherit half of your late husband’s entitlement, if he had any. There is also a deduction made for time contracted –out of the state second pension, and it may be possible to reduce the deduction as you gain further credits between now and state pension age. I recommend that you obtain a state pension forecast from the DWP, which you can request online. The forecast may not be accurate as it is based on the current system, but it will at least enable you to check that your late husband’s NI credits and Additional Pension credits have been tied in with your own record.
Q. I want to give my son some money to help him buy his first house. I took out an onshore Investment Bond many years ago for £15,000 which is now worth about £30,000 and this is the sort of figure he will need towards his deposit. The only problem is that as I am a 40% tax payer I understand that I will have some tax to pay if I surrender the Bond, and I would prefer to avoid this tax liability if possible as effectively this would mean I would have less to give him. Do you have any suggestions?
A. I am finding that a number of parents and indeed grandparents are having to help to get the younger generation onto the property ladder. You are correct if you surrender the Bond as a 40% tax payer, basic rate tax of 20% has already been deemed to have been paid by the Bond provider from within the fund so you will have a 20% tax charge (being the difference between 20% and 40%) to pay as well on any profit. As you have suggested that the profit on surrender would be about £15,000 the tax charge on you would be about £3,000. If your son is not a higher rate tax payer and the top sliced gain (£15,000 divided by the number of years the Bond has been in force) does not push him into the 40% tax band then you could assign the Bond to him. He could then surrender the Bond and providing he meets the conditions I have outlined he would not incur any higher rate income tax liability.
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
