Personal Finance Questions – August 2009

In this post we will answer some of the many questions we are receiving from visitors to the site. Although we cannot answer your questions directly and we are not authorised to give financial advice were we see a theme running through questions from our readers we will provide a generic answer on the site.

I remember at school the teacher always used to say “ask a question – if you have a question you can guarantee that half the class also have the same question but are too scared to ask!”.

Where can I get a free income and expenditure spreadsheet?

We posted an article a number of months ago which has proved to be extremely popular. Our Excel spreadsheet allows you to enter income and expenditure over a 12 month period, broken down into months to see when your cashflow will be good, and not so good.

Here is the article – Cashflow Forecasting – Income and Expenditure Spreadsheet

When does the ISA allowance change?

The ISA allowance is set to increase to £10,200 for the over 50’s on 6th October 2009, with the increase coming into effect for the under 50’s from 6th April 2010.

More info on changes in ISA allowances 2009/2010 can be found in these articles:

New Tax Year – New ISA Allowance – 2009/2010
Changes in ISA Allowances – Budget 2009

How can I avoid paying tax on my Bank Interest – I am a non-taxpayer?

If you’re a non-taxpayer you can register to receive your bank and building society interest gross (i.e. with no tax deducted). All you need to do is fill out a simple form and pass it to your bank or building society.

See this article:

Non-taxpayers – ensure you receive interest on your savings with no tax deducted

I am a non-taxpayer – can I pay into a personal pension?

Yes you can, you are entitled to invest up to £3,600 (gross) each tax year (before 5th April 2010) and receive tax relief on the money you invest – basic rate income tax relief is received on each contribution you make – you effectively only have to invest £2,880 to have £3,600 invested – the pension company reclaims the difference from the Inland Revenue (HMRC) even though you have paid no income tax!!!

See this article:

Pension Planning for Non-Earners

Is Inheritance Tax payable on ISA Investments?

Yes, at the date of death the ISA loses its tax-free status and forms part of the deceased’s estate for calculating any liability to inheritance tax.

I want to surrender my Investment Bond but the life insurance company says it will apply a Market Value Adjustment – what is this?

MVA/MVR’s can be applied to a with-profits investment at the time of encashment if there has been a fall in the stock market during the period before surrender. This is to ensure the person surrendering the investment receives a “fair value” for their slice of the with-profits fund and to protect remaining investors from those taking their money out.

Some investment bonds have an MVA free date – usually on the 10th anniversary – check your paperwork issued at the time you took out the investment or phone your life company for more details.

Article – With-Profit Bonds – Avoiding a Market Value Reduction

Can a Personal Pension be paid to Both Partners?

No – the pension is only payable to the “annuitant” (the person who took out the pension and bought an annuity – an income for life – with the fund at retirement).

A widow(ers) pension can be added to an annuity as an option, at the time the annuity is purchased – usually 50% or 66% of the pension if the person whose pension it is dies first.

Did you know you can shop around for your pension at the time of retirement – it’s called the Open Market Option – more information on Personal Pensions

Can additional lives assured be included on an Investment Bond?

Yes – you can have more than one “life assured” on an investment bond at outset. Parents might like to consider adding their children – this allows the investment bond to continue after death of the parents. Consult an Independent Financial Adviser.

Is it true that the longer you save the bigger your money will grow?

Yes – this is related to “compound interest” and the “time value of money”. In basic terms, interest earned on a savings account will, in subsequent years also earn interest.

For example, if you invested £100 in year 1 at an interest rate of 10% (if only!) – at the end of year 1 you would have £110. In year 2 you would earn interest on the £100 initially invested and the £10 interest received in year 1 – so the interest received in year 2 would be £11 (£10 on the initial amount invested and £1 interest on the £10 interest added at the end of year 1!).

Interesting articles: –

It’s not how much you save but how long
The Rule of 72 – The Time Value of Money

This is a selection of the many questions we receive – please contact us if you have a question and we will try to answer it in a future posting.

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