Questions Of Cash: 'Should I take my pensions now?'

Q I am approaching 60 and have two with-profits personal pensions maturing. I see this as an opportunity to consolidate them into a lower-risk pension without attracting MVAs [market value adjustments] because I do not need the income yet.

Q I am approaching 60 and have two with-profits personal pensions maturing. I see this as an opportunity to consolidate them into a lower-risk pension without attracting MVAs [market value adjustments] because I do not need the income yet.

With annuity rates continuing to decline, would I be better off taking the pensions now or wait until I'm 65 with the risk that lower annuity rates in five years will give me a similar pension, but with the loss of the earnings I would otherwise have been receiving in the interim? PH, by e-mail.

Peter Miller, pensions specialist at the adviser Hacker Young, says your question may sound simple, but the answer is complex. "The level of your retirement income will depend on variables, none of which can be guaranteed," he says. "The size of your pension fund and the prevailing annuity rates at the time of your retirement are the keys.

"Annuity rates have declined. Many analysts believe they will continue to decline, but this is not necessarily the case. Equity values have fallen since 1999, but may not continue to do so. It is because of the extreme equity market conditions that MVAs are being applied to many with-profits investments.

If the trends of falling annuity rates and falling equity values were to continue, it would be in your interests to purchase an annuity immediately, so securing your retirement income on the most advantageous terms. If annuity rates and equity values were to increase, it would be in your interests to delay annuity purchase for as long as possible.

Without knowing the details of your overall financial situation, it is not possible to say which is the most appropriate course of action for you. Any recommendation on the timing of an annuity purchase could be made only after a full assessment of your circumstances and after taking into account your attitude to risk."

You should take independent financial advice tailored to your precise situation, choosing an adviser with a pensions qualification.

Q I have held a tracker Isa with Legal and General for several years. Last September I authorised L&G to debit my account by £500 monthly from October to March to invest in a mini Isa. In April L&G took an extra £500 from my account, which was an error and took my total investment in my mini Isa to £3,500. I hold a cash Isa elsewhere.

After many phone calls, L&G admitted it had made a mistake and promised a refund. Weeks later, after more phone calls, I wrote asking for the £500 to be returned and for an explanation, and how it would affect my tax position. This was acknowledged at the end of May, but I am still waiting for my £500 and an explanation. MR, by e-mail.

Legal & General agrees it made mistakes, beginning by opening a maxi instead of a mini Isa. Consequently, it took payments from you which exceeded the mini Isa limit. L&G will reimburse you in full for the additional payments it withdrew from your account, plus interest. It recognises that you are concerned the Inland Revenue may regard you as having breached Isa rules, but points out that the Revenue knows only what L&G tells them, and it will advise them that you opened a mini Isa.

Q I am a UK citizen working in New York for a British company. I have recently enrolled into the company's 401K pension plan [a US scheme which offers tax deductible contributions and tax-deferred growth] with the company matching my contributions. It is likely I will return to Britain within a few years. What options do I have for rolling over the contributions into a UK plan? PP, New York.

Carl Melvin, of Pension Transfer Solutions, questions the wisdom of making the transfer out of your existing 401K scheme. He says: "The UK pension legislation does allow for transfers from overseas pension schemes to a UK scheme. Nearly all UK pension schemes are 'approved schemes' and benefit from tax benefits such as contribution tax relief, etc.

"The 401K legislation does not match approved legislation in the UK, so further investigation is needed. Before returning to the UK, consult a certified financial planner in the US to get advice on the US-to-UK transfer of benefits and consulting a UK CFP or pensions specialist independent financial adviser for details on the transfer regulations applicable. They can check out the position with the SPSS, formerly the pension schemes office.

"The costs of such a transfer are higher than normal and depending on the size of 401K fund, the costs may outweigh the benefits of transferring. The transfer from 401K would not attract tax relief. Keeping the money invested in a well managed portfolio may offer better longer term value."

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