Q. I am just at the point of retiring and have received a quotation from my pension provider for a pension annuity. It states the pension will be guaranteed for 5 years. I thought a pension was guaranteed for life, can you please explain?
A. Most pension annuities are guaranteed for life, (unless you have specifically requested a temporary annuity). It is however common for an annuity to contain a minimum period of payment in the event of a persons early death.
Therefore if the annuity has a “5 year guarantee”, and the person taking out the annuity dies after say 2 years, the annuity would continue at its full rate for a further 3 years. The cost of building in a guarantee period is often very small therefore in most cases worth having.
One word of warning though, rather than simply accepting the annuity figures supplied by your existing provider, you should perhaps involve a financial adviser specialising in retirement advice, who may well be able to find a better rate for you.
Q. My late husband left a will which included a trust arrangement to make use of his nil rate band for inheritance tax. I am one beneficiary, as are my two daughters and my stepson. I understand that this trust is no longer necessary, what can I do?
A. A “nil rate band discretionary trust” was a fairly common feature of wills prepared prior to October 2007, when it became possible for the second spouse to use any of the nil rate inheritance tax allowance left unused by the first to die. It is possible to unwind the trust, although there are a few things to be aware of. Although it will simplify matters, a nil rate band trust can have some benefits which may be lost. Firstly, assets in the trust would not be taken into account in any local authority assessment if you need residential care in future. Also, I note that you have two daughters and a stepson. If either you or your late husband had been widowed before, it may be possible to use the trust to help make use of that previous nil rate band, if it was not used, as well as your late husband’s, giving potential for up to three, or even four nil rate bands to be utilised in some circumstances. Finally, if you do decide to unwind the trust, do so with the specific advice of a good solicitor, and the exercise should be done not less than 3 months but not more than two years after the date your late husband died.
Q. I am a nurse and a member of the NHS 1995 pension scheme with about 25 years of continuous service. My husband is just over 10 years older than me and plans to retire in about 2 years when he will be 65 and ideally I would like to retire when he does. My understanding is that the NHS pension scheme is going to change next April and I wonder if I should ask to retire before the new rules come in as I am worried I end up being worse off by continuing to work for a further 2 years.
A. By the sound of it you are about 53 years old. The NHS 1995 scheme for most members has a normal retirement age of 60. As you say a new revalued career average rather than final salary scheme is going to come in from next April and the normal retirement age will be linked to the state pension retirement age. Any service built up under the final salary sections to April 2015 will be honoured. However anyone who is within 10 years of their normal retirement age such as you with continuous service will have the protection of being able to remain in the existing NHS 1995 scheme. The even better news for you is that if you have been a nurse since before 1995 you are likely to qualify for “special classes” terms under the scheme whereby you have the option to retire at 55 without any early retirement penalty, although you will only have service up to that age. This will allow you to draw benefits at the same time as our husband. If you need further clarification I suggest that you contact the NHS Pension office or an Independent Financial Adviser.
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
