Your money queries answered by Peter Rutherford, chief executive of Rutherford Wilkinson plc, independent financial advisors. Mr S R from Cramlington asks:
A colleague of mine who, like me, has a young family, says his financial adviser is going to review his life insurance cover shortly as he thinks he will be able to get his cover cheaper because he can get tax relief on his premiums. Why is this? Answer:
From April 6, 2006, the rules for Pension Term Assurance (PTA) are changing which is going to make this an attractive way to purchase life assurance. This is just one of many changes to pension legislation coming in from April. Very simply, PTA premiums are likely to be a bit more expensive than traditional life assurance rates due to the way the life company is taxed, but PTA premiums will qualify for tax relief. For example, if the premium quoted is, say, £10 per month, you'll actually only pay £7.80 as basic rate tax relief is given automatically. For higher rate tax payers, it will be even cheaper as they will be able to claim a further 18% tax relief. An independent financial adviser will be able to review your life assurance needs for you. Mrs W P from Newcastle asks:
We took out an investment bond almost 18 years ago but now want to cash it in to do home improvements. It has done quite well as we put in £5,000 and it is now worth about £18,000. My husband is worried that it could affect his age allowance and he might end up paying some tax. He is 79 and has pension income of about £19,000. My pension is only about £4,000. Can we do anything to avoid paying tax? Answer:
As your husband is over 75, the amount he can earn before paying tax is £7,220 (£7,420 from April 6, 2006), compared to the ordinary personal allowance of £4,895 (£5,035 from April 6, 2006). Half the profit on the bond would be regarded as your husband's and, as such, would reduce his age allowance down to £4,895, thereby increasing his tax liability. This could be avoided by assigning the bond from your joint names to your name only, so that the potential tax liability would fall on you. As your pension income is only about £4,000, there'd be no additional tax to pay. An independent financial adviser can help you with this exercise. Mr J P from Gosforth asks:
In your opinion, is the state pension age going to rise? If so, when? Answer:
John Hutton, the Secretary of State for Work and Pensions, has already made it clear that, in his opinion, a rise in the State Pension Age from 2020 is inevitable, and that to ignore this fact will simply pass a greater burden on to future generations. The fact is, we are statistically living longer so will need to work longer and save more to pay for our retirements. Investors Guide, a booklet with information on all aspects of investment, is available free to readers. For a copy, freephone (0800) 074-5489 or write to me at Rutherford Wilkinson Plc, 21-23 Bridge Street, Morpeth, Northumberland, NE61 1NT. Please also write with queries you'd like answered. Rutherford Wilkinson Plc is authorised and regulated by the Financial Services Authority. | 
Travel, Entertainment & leisure
Professional Services
Health
Home Style
Home Improvements
Fashion & Weddings
Gifts
