Readers' lives

Pension plans ... index-tracking funds ... building society windfalls. Each week we answer your letters on everyday financial concerns
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I recently took redundancy from British Telecom where I had paid into the pension scheme for 32 years. As part of the deal I will receive an enhanced pension, due to be paid from the age of 50, in October. I've now got another job where I could be working for another 15 years. Can I join the new pension scheme as well as receiving the BT pension? Also can I rejoin Serps (the state earnings-related pension scheme) to build up further entitlement - or pay lower national insurance contributions?

DB, Liverpool

Nothing could be better designed to confound mere mortals than the fiendish rules surrounding employers' pension schemes. Your first "problem" is that you have already built up the maximum employer-provided pension allowed by the Inland Revenue. The broad rule is that you cannot get a pension greater than two-thirds of your final pay.

The Inland Revenue, the DSS and the BT pension scheme have not given definitive answers to your questions. But Simon Mayho, technical controller of pensions research at Sedgwick Noble Lowndes, a firm of financial advisers, is quite confident about the position. He says that even though you might start drawing the maximum pension from one scheme you can still join another scheme in your new job. You can build up a pension of up to one-sixtieth of pay for each year you are in the new job.

You cannot pay a lower rate of national insurance contributions, even if you do increase your Serps entitlement as a result. Any additional Serps pension you build up will be based on a complicated formula that works out your entitlement and then deducts the "guaranteed minimum pension" you have already built up as a result of the BT scheme being "contracted- out" of Serps. Whether you can now rejoin Serps will depend on the rules of your new employer's scheme.

You can get a forecast of your state pension, including the Serps element, through the Retirement Pensions Forecast and Advice service of the Department of Social Security. Contact your local DSS office for the appropriate form.

There is so much advice on where to invest money that I am confused. Would it be best simply to invest in an index-tracking fund and stop worrying? CS, Surrey

Unless you have time to study the form of different unit and investment trusts and pick a fund that you reckon is set to produce superior returns, there is a lot to be said for picking an index-tracking fund. While some funds that aim to beat an index (rather than match its performance) do produce consistently good returns, many have a less than scintillating performance record. Most funds that aim to outperform an index fail to do so.

Index-trackers should give you above-average returns compared with other funds, mainly because there is less room for error in the way they invest - broadly speaking, they do what they say they will. That said, despite their name, they will normally underperform their index slightly, mainly because of investment management costs.

Direct Line, Fidelity, Gartmore, HSBC, Legal & General, Midland, Morgan Grenfell, Norwich Union, Royal Life and Virgin Direct are among fund managers offering index-tracking funds, most of which are available in PEP form, making dividends and profits tax-free.

If you cannot decide where to put your money, investing in a well-run index-tracker is a reasonable move, as long as you are aware that you will be missing out on the returns available from star-performing funds. Note, too, that trackers' charges tend to be lower than with many other funds because you do not pay for expensive stock market analysts. Computers tell the fund manager which shares to buy and sell.

One other point: an index-tracking fund is likely to produce better returns than the plethora of guaranteed stock market investment bonds. The latter do not usually give the full rise in the index they are tracking, nor the full and important benefit of dividend income.

In 1989 my wife and I opened a joint account with N&P. My wife was the first named account-holder. In February last year we transferred to a different account on the advice of the society and my name appeared first. As a result, I don't count as a two-year qualifying saver and have lost part of our windfall entitlement due on the imminent takeover of the society by Abbey National. Is there any action I can take?

WG, Guildford

In a word, no. You could try a complaint to the Building Societies Ombudsman but you are likely to be wasting your time.

You are not the only ones to lose out for exactly the same reason. You say the rules do not seem equitable and you are right. Other savers will lose out in the various building society takeovers and conversions for a variety of reasons, many of which are essentially arbitrary.

Anyone thinking of transferring accounts in a building society that is yet to announce plans to convert to a bank is warned to tread very carefully. Do not do anything that might jeopardise a potential windfall.

q Write to Steve Lodge, personal finance editor, Readers' Lives, Independent on Sunday, 1 Canada Square, Canary Wharf, London E14 5DL, and include a telephone number.

Do not enclose SAEs or documents that you wish to be returned. We cannot give personal replies and cannot guarantee to answer every letter sent to Readers' Lives. We accept no legal responsibility for advice.

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