Since you ask

Apr 11 2006

By The Journal

Your money queries answered by Peter Rutherford, chief executive of Rutherford Wilkinson plc, independent financial advisors. Mr SS from Alnwick asks: I'm about to retire and have a good final salary pension. I've also been paying into a free-standing additional contribution scheme. I read somewhere that I might be able to get a better annuity rate if I am a smoker or have health problems. I do take a few tablets but I wouldn't regard myself as being unhealthy. I did smoke but gave up about five years ago. Answer: The fact you once smoked may help you to get a better annuity rate. As you are on some medication, this may also help. Contact an independent financial adviser who can go through a medical questionnaire with you and call companies specialising in enhanced annuities to see if better terms can be obtained. Statistically, 40% of people may get some enhancement. Mrs AG from Gateshead asks: It is over seven years ago since I was advised to put money into an Investment Bond and wrap a trust around it. This was a standard trust wording provided by the insurance company and was completed for the benefit of grandchildren. Will changes to trusts have any effect on this scheme? Story continues ADVERTISEMENT Answer: As you made the gift into the trust over seven years ago, the capital is no longer in your estate for inheritance tax (IHT) purposes if you die. However, it is possible the funds could be subject to a periodic charge to IHT every 10 years. This will depend on the age at which your grandchildren become entitled to the proceeds of the trust. The maximum age for an accumulation and maintenance trust is 25. The Budget proposes that if the age at which they become entitled is higher than 18 then the trust may have to pay a periodic IHT charge every 10 years. Few trusts, in my experience, are set up to deliver this amount of money into the hands of beneficiaries at such an early age (that is the whole point of putting the money under the control of the trustees, as opposed to an outright gift). The charge will be at 6% of assets in excess of the IHT nil rate band (£285,000 for 2006/07). If the value of the fund is below the IHT nil rate band, this charge won't apply. But there could be other charges, for example if any beneficiary is changed or when the assets from the trust are distributed. The proposals give a two year period of grace to alter the terms of the trust, if required. We'll have to wait for the publication of the Finance Act for full details. I suggest you take no action then, after the Act is published, consult an independent financial adviser and solicitor for guidance. Mr JP from Blyth asks: The Chancellor has pushed up the level at which stamp duty starts on house purchase from £120,000 to £125,000. Is it likely to help or hinder first-time buyers? Answer: There seems a resistance to paying stamp duty leading to properties on the market just under the threshold. Where properties were previously on the market for, say, £119,950, there may be a move towards £124,950, so indirectly this may not help first time buyers. We see this a lot at the next stamp duty level where, at £250,000, it increases from 1% to 3%, so a lot of properties seem to be on the market at about £249,950. ********** For a free Investors Guide, freephone 0800 074 5489 or write to Rutherford Wilkinson Plc, 21-23 Bridge Street, Morpeth, Northumberland, NE61 1NT. Please also write with queries. Rutherford Wilkinson plc is authorised and regulated by the Financial Services Authority.

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