Your questions answered by an expert panel from Coopers & Lybrand

I am 33 years of age and have a personal pension which, because I am a cautious investor, I have all in a cash fund. My adviser says this is not wise. Is he right?

As a cautious investor you will no doubt wish to avoid risk. However, at 33 the main risk with your personal pension, particularly if it is your main source of retirement income, could be that your pension fund does not grow faster than your earnings.

While cash investments are currently doing rather well, history would suggest that, over the long term, they are unlikely to outpace increases in national average earnings; for this you need equities. From this perspective, cash would be a risky investment and one that would not be appropriate to a young cautious investor.

How will my employment income be taxed in the United Kingdom if I go to work overseas?

If you go to work overseas full-time for a period spanning a complete UK tax year (ie. 6 April-5 April) you should entirely avoid UK tax on your employment income following your departure though there may still be a liability on any UK duties. If your employment overseas does not span a complete tax year you will remain UK resident and in theory liable to UK tax.

However, if you satisfy certain conditions you may obtain a tax relief which exempts up to 100 per cent of your employment income from UK tax. Broadly, you will need to be out of the UK for at least 365 days altogether, no single visit may exceed 62 consecutive days and your cumulative UK days may not exceed 1/6 of the total days in the period.

In either scenario, your tax position in the overseas country must be considered.

I have an endowment policy due to mature. I have been offered the opportunity to reinvest the proceeds into an investment bond using a managed fund. Is this a good opportunity?

A managed fund in an investment bond is typically a broadly invested insurance fund holding equities, bonds, property and cash. The insurance fund suffers tax up to 25% on the income and gains of the underlying assets.

The gain on the bond is deemed to be received by you net of basic rate tax. If you pay tax at the higher rate you will need to account for the extra tax. Such bonds aim for capital growth, but you might consider alternative products which are taxed more efficiently in most circumstances, ie PEPs, unit trusts etc.

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