Child Trust Funds (CTF), designed to give UK children a head start in life, are two-years-old.
The scheme was launched in a fanfare of publicity on 6 April 2005.
It is designed to give all children born after September 2002 - regardless of their background - a small cash lump sum which by the time they are 18 has grown into a whopping nest egg.
A total of 2.6 million CTF vouchers have been issued to date and proved popular with parents - after all, in essence, it’s a freebie.
For Julian and Charmian Hickman from Farnham, the CTF provides a welcome opportunity to cushion the blow of higher education costs and higher house prices.
They have two children Iona, four, and Henry, two. The future financial hurdles Iona and Henry face are causing Mr and Mrs Hickman concern.
“The financial pressures on young people are far, far greater than when I was growing up,” says Mr Hickman.
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In my view, the Child Trust Fund needs to become a life-long incentivised savings vehicle
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“I benefited from a university grant and there was no such thing as tuition fees. I am really keen that my children leave university with no debt.
“It would also be great if they could buy their own home. The past 20 years has shown us the value of having property, if they could use their CTF cash for this that would be a good thing,” he adds.
But no matter how cleverly invested, a 250 handout is unlikely to cover university costs 15 years from today, nor is it going to buy much in the way of a home.
Life-long vehicle
Mr Hickman believes that the nature of CTFs needs to change. The whole project should become more ambitious.
“It is a good start, but this thing should not just stop at 18, when the child has the right to access their CTF,” he says.
“In my view, the Child Trust Fund needs to become a life-long incentivised savings vehicle.
“People should be able to build up a CTF and access funds from it when they need to cover a deposit on a home or meet university tuition fees, but then keep it going into old-age,” Mr Hickman adds.
The government recently made moves towards this when it announced that people would be permitted to roll their CTFs into an Individual Savings Account (ISA) at age 18.
In effect, this means that people not wanting to use their CTF money at age 18 will be able to keep it shielded from the tax man for as long as they wish.
The Hickmans are paying extra into Iona and Henry’s CTF.
Topping-up can make a substantial difference, the Children’s Mutual has estimated that a CTF opened with a 250 voucher two years ago and topped-up to the tune of 24 a month is already worth 1,000 on average.
Complexity
However, not every parent has embraced CTFs in the same way as the Hickman’s.
Official figures show, that despite millions being spent marketing CTFs, a quarter of all vouchers are not invested by parents.
The parents or guardian have a year from when the voucher is issued to invest it in an approved scheme.
There are dozens of these approved plans to choose from, offered by banks, building societies and other financial institutions.
Savings plans have their annual management charges capped at 1.5%; while some invest in the stockmarket and others are straightforward deposit accounts.
If the parent or guardian forgets to invest the voucher within a year of issue it is automatically shunted into a default CTF.
Mr Hickman, who works in the City of London, blames complexity for poor take-up.
“I can see why people would be slightly bemused by the whole investment process,” he says.
“There is a definite lack of transparency out there.
“Take the charges levied by the providers, you really have to read the small print and understand jargon to see how much a CTF is actually costing,” Mr Hickman adds.
Yet according to the Institute of Public Policy Research (IPPR), which was heavily involved in formulating the CTF, the advent of CTF’s has given a kick-start to childrens’ savings.
Around a third of all CTFs opened are topped-up with regular monthly payments, usually from parents.
And according to Children’s Mutual, top-ups are not just the preserve of the rich, between 20% and 30% of their low income customers are making additional contributions to a CTF.
It seems, CTFs are popular across all social groupings.
Dr Rajiv Prabhakar of the London School of Economics recently questioned parents over their attitude to the CTF.
He found that when given the choice between an enhanced child benefit payment and a child trust fund, the majority in his focus groups went for the CTF option.
“CTFs are having a real effect on UK savings culture,” says David White chief executive of the Children’s Mutual, one of the UK’s biggest provider of CTF accounts.
“People who would never have had any form of children’s savings in place now have something quite substantial. In addition, both parents and children are gaining a financial education from the whole CTF process.”
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CHILD TRUST FUND FACTS
The government gives parents or guardians of all children born after September 2002 a voucher worth a minimum 250.
If the parents are in receipt of child tax credit then the CTF voucher is worth 500.
The government has pledged to top-up the initial CTF voucher with a further 250 payment at age seven.
Parents, grandparents, family and friends can pay in extra cash, up to 1,200 per year, into the CTF plan to boost its value.
Child Trust Fund helpline 0845 902 1470
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Revolutionary
When first mooted, CTFs were seen by some experts as quite revolutionary.
For the first time government money - in the form of the initial CTF voucher - was to be trusted to the vagaries of the stockmarket to produce a social good.
The same approach, the left-wing think-tank the IPPR suggested, could be used to target all sorts of groups of people.
For example, it is planned that children in care are to have their CTF toped-up by local authorities so to give them a better start in life.
In addition, campaigners are lobbying the government to match contributions made by low income families into CTFs.
But what the IPPR dubbed the ‘asset based approach’ to welfare seems to have run out of steam, perhaps due to tightening of government finances.
Money wasted
As it enters its third year, CTFs are not without their critics.
Vince Cable, Liberal Democrat Treasury spokesman, has called for CTFs to be scrapped.
New born babies receive vouchers worth at least 250
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Chief amongst Mr Cable’s gripes are that CTFs are poorly targeted as all families, regardless of income, benefit.
In addition, Mr Cable has argued that the provision that children get unlimited access to their CTF at age 18 is fundamental flaw.
What is to stop them “wasting” their CTF cash on a couple of weeks in the sun for example?
With such political opposition and increasing constraints on national finances, Mr Hickman does not hold out much hope for the long term prospects of CTFs.
“I do not trust politicians to see this through. When I discuss CTFs with friends, the overwhelming view is take advantage of it while it is still available,” he says.
But according to Mr White, woe-betide any government choosing to scrap CTFs.
“By the time of the next election millions of families will be benefiting from CTFs and won’t vote for a party looking to deny others the opportunity,” he says.
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US experts claim that bones alleged to belong to a founder of the country are authentic and a skeleton buried in the UK, thought to be his sister, is not.
The archaeologists in Virginia are arguing with UK experts over American founding father Bartholomew Gosnold, born in Grundisburgh, Suffolk.
DNA tests revealed a skeleton buried in Suffolk is not related to the US bones.
US experts claim they have the real Gosnold while UK scientists believe the Suffolk skeleton is authentic.
The British experts believe the body buried at Shelley, Suffolk, is Gosnold’s sister, buried in the 1600s, and are casting doubts on the American find.
US scientists aim to prove the remains found in Jamestown in America were those of Gosnold and claim the woman buried at Shelley was probably not Elizabeth Gosnold Tilney.
Bartholomew Gosnold is said to have founded the first English-speaking American colony in Virginia in 1607.
Nick Clarke, spokesman for the Diocese of St Edmundsbury and Ipswich, said the test results have now been examined by the Advisory Panel on the Archaeology of Christian Burials in England.
New tests planned
The panel has decided that the conclusions drawn by the American scientists remain open to interpretation and that the remains could belong to Elizabeth Gosnold Tilney, he said.
Further tests were carried out on the remains and Mr Clarke said carbon dating put the date of the woman’s death at Shelley close to that of Elizabeth Gosnold Tilney, who died in 1646 aged in her late 60s.
This did not exclude the possibility that the Shelley skeleton was that of Anne Framlingham, an alternative that British historians offered when the results of the DNA comparison were revealed.
Bill Kelso, director of archaeology at Historic Jamestowne, said: “We are discussing the advisory panel’s interpretation with researchers in an effort to reconcile the differences.
“Until questions about these new interpretations are answered, and we can learn more from further tests, we will continue to rely on the historical and archaeological evidence that so far tips the scale to Gosnold.”
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Fed up with the vagaries of the stock market and the poor returns from low interest savings accounts?
Alternative investments have always been a popular option, whether it’s wine, art or collectibles.
Of course, it’s harder to find the range of advice on financial matters you get in the newspapers and on programmes such as Working Lunch.
So you need to do plenty of homework before splashing out your hard-earned cash on that up-and-coming painter or a rolltop desk of unknown origins.
Rules
One of the most popular areas is antique furniture, no doubt boosted by the spate of TV programmes all seeming to feature the perma-tanned David Dickinson.
Dealers claim that furniture has outperformed the markets and house price inflation over the past 30 years.
There are some basic rules that apply to any alternative investment.
Firstly, buy something because you like it. It’s no good having an ugly object sitting in your living room simply because you hope it will shoot up in value.
Be focused - buying random pieces of art or furniture is fine, but a collection of sculpture or Art Deco may ultimately be more valuable.
Investment
It’s often better to choose an investment that already has a following - there will be more buyers when you come to sell.
“As with any other investment, it is essential to buy the right thing at the right price,” advises Simon Bowyer, director of Yorkshire-based antiques group Tomlinsons.
“Pay too much for an item and you will have to wait many years for inflation to catch up with your error.”
Finally, these investments aren’t like day trading where you can dip in and out of the markets.
Be prepared to invest for the long term, so don’t tie up cash you might need in a hurry.
Specialists
So what do you look for in antique furniture?
Pieces from the late 17th and early 18th centuries are big at the moment.
If it’s marked or labelled with a name you’ve heard of - Ince & Mayhew, Seddon or Gillows are examples - it’s probably worth a fair bit.
But Art Deco from the early 20th century and even pieces from the 1960s are worth collecting.
Georgian English furniture has always been considered a good long-term investment. Some observers think this market has been depressed recently so it could be a good time to get into it.
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Top Tips
Compare prices across a number of outlets and be prepared to negotiate.
Always buy from a reputable dealer who is a member of a professional body.
Buy the best quality you can afford.
Insist on a full written description of the goods you are buying, with details of dates and originality.
When buying watches or clocks always ask for a guarantee.
Go for something that is functional as well as attractive. It will hold its value.
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Other specialists say Art Nouveau and Arts & Crafts are good investments at the moment.
English oak and country furniture is also seen as undervalued.
You can buy either from dealers or at auction - but whatever you do, check prices regularly so you can tell what’s a good deal and what isn’t.
Dealers
Provenance can also be important. Is there any verification that it was made by someone well-known? Or does it have an interesting history?
Some dealers and investors think it’s sensible to buy only the best, as a top quality piece will rise more in value than a poor example.
If you want a helping hand, there are dealers who will buy, hold and sell pieces on behalf of clients, taking much of the stress out of running a portfolio.
While Tomlinsons deals mainly with the trade, six years ago, it started a Fine Furniture Club, where the public get to visit at weekends and buy stock.
This part of the business has grown rapidly, with sales up more than 30%. Membership is now about 11,000.
Simon Bowyer says that when you buy an antique you’re also paying for the quality of the piece.
“You can buy two antique chairs for 750 which are 150 years old and, if looked after, will last another 100 years,” he says.
“Having them made today could cost about 2,000 each. With antiques, you’re benefiting from the cheap labour of the 17th century.”
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Actress Cameron Diaz has accepted “substantial” libel damages over a UK newspaper story which alleged she was having an affair with a married man.
Ms Diaz, 32, sued News Group Newspapers, publishers of The Sun, over a story published in May 2005.
Following an investigation The Sun has admitted “any suggestion of a romantic involvement is entirely untrue and without any substance whatsoever”.
Charlie’s Angels star Diaz has dated singer Justin Timberlake since 2003.
The article in The Sun claimed: “Justin Timberlake’s bride-to-be Cameron Diaz has been caught snogging a married man.”
The man was reported to be her MTV colleague Shane Nickerson.
‘Caught out’
“It was explained to the reader that he was a married man, married to a high school teacher and that he was also the father of a one-year-old daughter,” Ms Diaz’s lawyer Simon Smith told the High Court in London.
Readers were informed, said Mr Smith, that “they have enjoyed more than just a professional relationship”.
The article went on to say the actress had been caught out “while her pop star fiance prepared to go into hospital for a throat operation”.
However, The Sun has since accepted that “the relevant incident involved no more than Ms Diaz giving a friend a goodbye hug”.
Ms Diaz has been dating Justin Timberlake for more than two years
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“The publication of these allegations has caused damage to the claimant’s personal and professional reputation, in addition to obvious distress to both herself, Mr Timberlake, Mr Nickerson and his wife,” said Mr Smith.
News Group Newspapers has agreed to pay undisclosed damages to the actress and reimburse her legal costs.
“In those circumstances and in light of this vindication my client is prepared not to proceed any further against The Sun newspaper.”
The hearing did not concern a second defendant, American Media Inc, publisher of the National Enquirer magazine, “against whom these proceedings will continue”, said Mr Smith.
News Group Newspapers lawyer Benjamin Beabey told Mr Justice Eady The Sun’s story was based upon the earlier report in the National Enquirer.
“It entirely accepts that the allegations are without foundation and ought never to have been published.”
Earlier this week, Ms Diaz saw photographer John Rutter found guilty of trying to sell topless photos of the actress in 2003.
Mr Rutter was convicted in a Los Angeles court of forgery, attempted grand theft and perjury. He is due to be sentenced on 15 September.
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Tension has remained high in the region since the kidnapping of the villagers on Tuesday.
The curfews in the Muslim-majority towns of Kalmunai and Sammanturai were relaxed for Friday prayers but then immediately re-imposed, police officials told the AFP news agency
The move came as Liberation Tigers of Tamil Eelam (LTTE) leaders meet in Paris to decide whether to return to the peace process they walked out of in April.
Tigers’ denial
The Sri Lankan Government says it will recruit 500 policemen from the curfew area to try to curb violence against the minority Muslims.
The Tigers have denied any involvement in the abduction of the villagers, blaming those “opposed to the peace process”.
The rebels have also denied involvement in the killing of four Muslims in the east in the past week.
Tension has risen between Tamil and Muslim communities
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Muslim politicians, however, accused the Tamil Tigers of the killings while Norway, which is brokering the peace process, expressed “grave concern” to the Tigers over the deaths.
Muslims make up about 7.5% of the Sri Lankan population, compared to 74% Sinhalese and 12.6% Tamil.
The meeting of Tigers leaders is being held in France so that expatriate Tamil experts can be consulted.
It is expected to last up to 10 days and there has been no firm indication yet that the Tigers will set a date for the resumption of talks.
The Tigers pulled out of negotiations with the Sri Lankan Government on 21 April after accusing it of failing to meet promises made during six rounds of peace talks which followed a ceasefire in February 2002.
The rebels have been insisting that the government give them control over an interim administration for the whole of north-eastern Sri Lanka.
But the BBC’s Sri Lanka correspondent, Frances Harrison, says the Tigers have now mellowed to the point where they are willing to put forward their own ideas on how power-sharing should work.
Billions of dollars of foreign aid, pledged in June for rebuilding the country, hinges on progress in peace negotiations.
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BabyCentre
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I thought I would open today with a suggestion from one of our own production team, who recently celebrated the birth of his first child.
A special moment in anyone’s life, it can also be quite daunting. So it is comforting to know there are places on the web where you can get help.
BabyCentre is packed full of great advice, from the serious issues of health and family finance, to the lighter side of parenting, such as naming your child.
There are topics covering every stage of having a child, from conception through to toddler age. The articles are well written and practical, offering insights into what to expect as your child grows older.
I love the layout of this website. Navigation is made simple by the resident navigation panel on the left, and if you register you can build your own personal page - a guide based on your own stage in the process, which offers advice and tips relevant to you.
Use the Baby Calendar feature for a concise outline of what you should be noticing as your baby develops, both inside and outside the womb.
And the community section is a brilliant idea for establishing a vital support network.
Sometimes it is just nice to know you are not alone, and by entering the date of your baby’s birth in the Birth Club finder, you will be connected directly to others at the same stage as you.
There is even a Dads-only area, which can be found in the menus under the community section.
Audit My Software
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In the normal course of using a computer, many additional applications and processes can get installed over time. This can slow your processor down dramatically, and often it can be hard to see what you need to be running, and what is just eating up valuable resources.
The download, provided by Audit My Software provides an answer to this quandary by listing all running processes and how they are connected to your operating system.
Download the application first by clicking the link on the opening page. It is a very quick download, and once installed you can access it by launching the System Tracker from the link placed on your desktop.
Now you will see all of the applications and processes you are running listed in the main window. If a process is using up memory it will be shown in the CPU usage column under the Processes tab. If it is unnecessary just highlight it from the list and click the X to kill it.
There are also tabs to see what is going on in your registry, and what programs are scheduled to run at start up. Keeping control of your computer’s activity has never been so easy.
The Ascii Art Dictionary
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Now a suggestion sent in by Ramprasad from Bangalore, which celebrates one of the geekiest forms of art I think I have ever seen.
At The Ascii Art Dictionary you will find everything you ever wanted to know about creating pictures out of keyboard characters.
Ascii stands for American Standard Code for Information Interchange, and is basically a techie term for a character-set based on the Roman alphabet as used in modern English.
But that is not important. What is, is that many talented people have spent many a long hour figuring out ways to make these characters take on a new life.
Click Collection, and then choose a word from the list that follows to have a look at the kinds of things you can create. Everything from an Aardvark to a Zulu!
If you fancy having a go yourself there are certain things you need to be aware of, such as the use of non-proportionate fonts, and where certain characters appear on the page. There are some great tutorial links in the resources section.
Google Montage
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Finally, an art form of a different kind - although to be fair, it is still pretty geeky. It is another one of those Googlehack sites that suggests new ways to have fun with this popular search engine.
GoogleMontage is my recommendation for a little bit of random fun. Random because this particular Googlehack makes a montage of random pictures taken from the search strings you provide.
Just put in a name, enter a number of search strings on different lines, and then wait for your artwork to be delivered.
If there is a queue you will be able to see your request’s progress at the top left of the opening page.
Once your submission is ready, it will be displayed in the panel below, and you can click to look at it in either full, or 50% resolution.
An interesting little curiosity this one. Do be warned though, there is no filtering on the images returned, although the website’s creator does state he’ll remove any montages containing inappropriate images when he sees them.
Click Online is broadcast on BBC News 24: Saturday at 2030, Sunday at 0430 and 1630, and on Monday at 0030.
A short version is also shown on BBC Two: Saturday at 0645 and BBC One: Sunday at 0730 .
Also BBC World.
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E-mails claiming to contain details of the storms that battered Europe contain a malicious virus, security firms warn.
The e-mails with the subject line “230 dead as storm batters Europe”, can leave computers vulnerable to attack.
The messages were first detected as the storms, which have killed at least 28 people, continued to rage.
Variants of the Windows virus have circulated for several days, but experts were surprised at how quickly the new modified virus appeared.
“The new virus only started spreading a few hours ago,” said Mikko Hypponen, chief research officer at security firm F-Secure. “The spamming started when the storms were still raging.”
Mr Hypponen believes the adaptation was designed to take advantage of the interest in the storms.
Security firms advise computer users not to open e-mail attachments unless they are expecting them and to keep security software up to date.
Slave network
Malicious coders often take advantage of celebrity names or large news events to spread viruses and worms.
in 2005, an e-mail scam offering regular news updates following Hurricane Katrina spread a virus that allowed hackers to take control of a computer user’s files.
“Malware writers will use any newsworthy event to try and gain a few minutes of airtime and infect a few unprepared computer users,” said a spokesperson for security firm McAfee.
The new virus, called Small.DAM, was spread through e-mails with a variety of subject lines purporting to be news. Other variants included “British Muslims Genocide” and “U.S. Secretary of State Condoleezza…”
The virus is a trojan - a program or message that look benign but contains malicious code - that is installed when a user opens the e-mail and clicks on an attachment. The attachment could be called Video.exe, Read More.exe, Full Clip.exe or Full Story.exe. It can only infect Windows PCs.
“When you click on the attachment it installs a backdoor on the infected PC giving full access to the virus writer to do anything they want,” said Mr Hypponen.
“What they typically do is search your hard drive for credit card numbers and e-mail addresses because they can resell both of those.”
Typically, said Mr Hypponen, the virus writers will then use the computer in a botnet - network of slave machines used to support all kinds of cyber crimes such as sending spam and phishing e-mails.
Users would not be aware that their computer was infected.
F-secure said it had seen “hundreds of thousands of e-mails sent” but did not know how many machines were infected.
“How many people clicked on it? It could be thousands or tens of thousands,” said Mr Hypponen.
However, most firms treated the virus as a low security threat and have now issued security updates.
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NHS hospitals and ambulance crews are to get radiation equipment to enable them to detect dirty bombs.
The move is part of government efforts to ensure the NHS and other emergency services can cope in the event of a major terrorist attack.
Ministers have previously announced plans to install detectors in ports and airports. Equipment is also going to police and fire officers.
The government says the steps are being taken as a precaution.
Radiation exposure
Under the plans, every A&E department in the country will receive monitors to enable doctors to see if any patient admitted following an attack has been exposed to radiation.
Ambulance crews will be issued with personal radiation dosimeters to enable them to test for radiation at the scene of an incident.
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We will continue to review and adapt these measures
Beverley Hughes,
Home Office Minister
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Officials are also looking at whether equipment used by the military to detect the release of chemicals can be adapted for use in hospitals and by emergency response teams.
Extra money is also being made available to ensure NHS staff are fully trained to deal with the aftermath of any attack.
A&E staff are being sent on two-day courses to bring them up to speed on the biological agents that could be used by terrorists.
GPs are being sent “clinical action cards”, which aim to help them to treat patients caught up in a biological attack.
Hospital consultants specialising in communicable and infectious diseases are to receive extra training to ensure they are also up-to-date.
The NHS has also received thousands of protection suits for key staff for use in the event of a attack.
The plans are outlined in a document called The Scientific Response to Terrorism, which was produced in response to a report by the Commons science and technology committee last year.
Home Office Minister Beverley Hughes said the government would keep its plans to deal with an attack under review.
“Our security arrangements are regarded by experts as among the most disciplined and highly co-ordinated in the world.
“We will continue to review and adapt these measures to ensure that the public can go about their business with the confidence that everything possible is being done to protect them.”
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Answered by Malcolm McLean of the Pensions Advisory Service.
Derek Ford has heard that when calculating state pension entitlement it is possible in some circumstances for wives to substitute their husband’s national insurance record in place of their own. When does this happen?
Entitlement to state pension normally depends on your own individual record of national insurance (NI) contributions over your working life.
Although it is not a case, as Derek puts it, of substituting one record for another, it is possible for a wife who has an incomplete NI record to claim approximately 60% of her husband’s state pension, if this is better for her. At the present time this can only be done when the husband himself reaches state pension age and starts to draw his pension. There were some modifications to this proposed in the recent Pensions Bill -in particular to allow this to happen regardless of whether the husband had started to draw his pension or nor, provided he has reached state pension age.
Otherwise, the only situations where it is possible to substitute another person’s national insurance contribution record for your own are on death or divorce. For example, with a divorcing couple, the ex-wife can have her pension entitlement based on her ex-husband’s record up to the date of their divorce.
Chandra Raajasuuriya reaches state pension age of 60 in January 2010. By then she will have 32 qualifying years to count towards her state pension entitlement. She is ineligible to plug the gap in her record with voluntary contributions because the missing seven years needed were in the 70s. She wants to know, in view of the new rules she has heard are coming in, if she delayed claiming her pension until 6/4/2010, would this enable her to qualify for a full state pension?
It is true that the recent Pensions Bill outlined proposals to reduce the number of national insurance qualifying years needed to receive a full state pension from 39 (for women) to 30. If the legislation is confirmed this is due to take effect from 6 April 2010.
However, this will not help Chandra. Because she reaches her state pension age before the effective date of the change the old rules remain applicable in her case. She will therefore still be short of the 39 years necessary for her to receive the full state pension (currently 84.25 a week).
She can of course delay taking her pension in order to build up a higher entitlement for the period of the deferment or if she puts off claiming for at least a year, to have the option of a lump sum. Further information on this can be viewed on our website: www.pensionsadvisoryservice.org.uk.
A number of questions have been sent in about the arrangements for cashing-in ‘trivial (small) pensions’.
Mr Kitchen asks about his wife who is shortly due to retire at age 60. She has a pension from a former employer with a fund value of 14,368. She thought because this was under 15,000 she would be entitled to take it all as cash. She has now been told, however, that the scheme will not agree to do this. Is this right?
Mr Dickson has a personal pension and was originally told he could have a lump sum of 279 in exchange for his pension. The life office have now come back to him and told him because he is due a company pension greater than 750 a year, they cannot offer him the lump sum. He would appreciate an explanation of the rules so he can check whether the life office is right.
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In some circumstances it is possible to exchange small pension entitlements for a cash lump sum
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In some circumstances it is possible to exchange small pension entitlements for a cash lump sum. The rules for this are laid down by HMRC (Her Majesty’s Revenue & Customs).
There are four main conditions:
- The total value of all your pension plans must not exceed 15,000 in the current tax year. This will increase progressively to 18,000 by 2010.
- You must be aged between 60 and 75
- All the cashing-in from your different plans must be completed within a single 12 month period
- The scheme rules must provide/be amended if necessary for trivial payments to be made.
In Mrs Kitchen’s case it appears she could satisfy the first three conditions but unfortunately for her, not the last. For whatever reason, the scheme has decided it cannot or will not change its own rules to permit this option. As HMRC’s regulations are permissive, and not mandatory, they cannot be forced to do so.
As regards Mr Dickson, it is the first condition that is the problem. He has a company pension, in addition to his personal pension, and the total value will exceed the 15,000 limit. This is because HMRC rules require a company pension to be valued for trivial pension purposes, by multiplying it by 20 (or 25 if the pension is already in payment).
Therefore, as the company pension is said to be greater than 750, this on its own takes him over the limit (750 multiplied by 20 equals 15,000).
For further advice on the trivial pension rules, contact the Pensions Advisory Service’s Pensions Helpline on 0845 601 2923.
Brian Crowe is already in receipt of the state pension and also receives a company pension. He keeps receiving through the post information telling him about investing in a SIPP and the tax advantages of such an investment (invest 2,808 and the Government adds 792 - total 3,600). He wants to know whether a SIPP is open to everyone to invest in, even though, like him, they are already receiving a pension or pensions and if the Government contribution really does make this too good an opportunity to miss.
Any United Kingdom resident under age 75 is able to contribute towards a personal pension.
A Self-Invested Personal Pension (SIPP) is a particular type of personal pension, which offers flexibility in investment choices. As such, it is probably best suited to the more sophisticated type of investors who want more of a say in where their money is invested. SIPPs are also not normally recommended for investors with small pension pots.
For a person like Brian who may not have earned income, it is possible to contribute up to 2,808 in a tax year which, with basic rate tax relief added by Government, becomes 3,600. You can pay more, but there will be no tax relief on the excess.
Brian should not be unduly induced by adverts but if he has the money and really is interested in setting up a further pension plan at his time of life, the option is open to him. I would strongly recommend, however, that he takes professional advice before doing so.
Derek from Belfast says he was recently contacted by a firm of complaint handlers who offered, for an upfront fee of 500, to pursue a complaint on his behalf on the basis that he had some years ago been advised to contract out of SERPS and might have been wrongly advised. If they were successful, 12% of any compensation would also be payable to them. Derek wants to know whether this is likely to be money well spent.
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There has been some concern in recent times about the activities of professional complaint handlers
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There can be no certainty that any claim for compensation based on an argument that you were misadvised to contract-out would be successful. In fact, so far, I understand there have been relatively few successful claims. There is, therefore, more than a little risk that paying an upfront fee of 500 would not be in your best interests.
In any event, there is a free process which you can use if you feel you have a case. Initially you should complain to the company who provided you with the advice. If you remain unhappy after they respond, you can then ask the Financial Ombudsman Service (FOS) to decide your complaint. Their agreement to investigate and their ultimate decision will not depend on the involvement of a professional complaint handling company.
There has been some concern in recent times about the activities of professional complaint handlers. New legislation in the form of the Compensation Act 2006 will require businesses providing complaint handling services to be regulated and authorised to conduct such business. This will take effect from 6 April 2007 and it is intended that it will be an offence to operate without authorisation from this date.
P. Getty wants to know whether in general it is advisable to transfer pension rights. He has almost nine years’ pensionable service in a former employer’s scheme and in exchange for transferring this, has been offered four years in his current employer’s scheme. Both schemes are final salary.
It is usually possible to transfer former pension rights into your current employer’s scheme or into a personal or stakeholder pension plan arrangement.
Transfers should only be considered where there is some clear advantage in doing so. Obviously the main factors to take into account would be a comparison of the pension being given up and the credit offered in return. But you should also take account of associated benefits such as death cover and the level of increases in payment, which may vary from scheme to scheme. Whilst on the face of it four years in exchange for nine may not sound like a good deal, you need to take into account that the value of the four years additional service improves with each future pay rise.
Another factor could be the financial viability of the respective employers and the potential risk of insolvency. Although the degree of protection has been considerably improved in recent years due to the introduction of the Pensions Protection Fund, the enforced closure of a scheme because of the insolvency of the employer could still result in financial loss for members, particularly those under the scheme’s normal pension age.
Before arranging a transfer you should normally therefore consider seeking independent financial advice. These are complicated matters and it is important you understand all the pros and cons. For more general information you can obtain a leaflet about transferring from the Pensions Advisory Service by calling their Pensions Helpline on 0845 601 2923.
Keith from London says that he recently received a letter from his former employer offering him a cash sum of 2,000 if he were to transfer his preserved pension entitlement out of their final salary scheme to another arrangement. 2,000 is a lot of money and Keith is tempted, but he wants to know is it a good idea? His current employer does not offer a pension scheme and therefore if he were to transfer, it would have to be to a personal pension.
It is normally not advisable to transfer from a final salary scheme to a personal pension as the cost to match the benefits given up is likely to be much higher than the transfer value offered, even if the incentive to transfer is taken into account. Keith may also be giving up valuable associated benefits such as a widow’s pension, as well as a guarantee that his pension will keep pace with inflation.
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It is normally not advisable to transfer from a final salary scheme to a personal pension
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However, 2,000 is indeed a lot of money and I can understand why Keith is tempted. Nevertheless it is important that he understands the implications of accepting the offer. In particular he needs to think very carefully about the benefits he will be giving up, and the likely, probably reduced, benefits, he might obtain in their place.
Whilst it is not normally advisable to transfer from a final salary scheme to a personal pension, high earners worried about the financial strength of their employer may be tempted because of the limited protection available from the Pensions Protection Fund. This is, however, a rare example where taking the incentive may make financial sense.
In all cases, it is important that financial advice is obtained so that the pros and particularly, the cons are properly understood.
Terry Brice is a member of his company’s pension scheme. He has recently received a letter saying his company plans to introduce a ‘SMART’ pension arrangement and he has to decide whether to join or to opt out. He has been given very little information. What are the pros and cons?
What Terry is probably referring to here is a form of ’salary sacrifice’ arrangement, under which the scheme member gives up part of their salary in return for a larger contribution to their pension scheme by the employer. This would effectively reduce the employee’s salary but with that loss of salary being made up by the increased contribution from the employer.
The main advantage of this sort of arrangement is that both employer and employee achieve a saving in their national insurance (NI) bill as their NI contributions are now based on the employees’ lower salary.
This is a legitimate arrangement, which has financial advantages for both the employer and the employee. The arrangements have to be approved by HM Revenue & Customs (HMRC) which is not always forthcoming and depends on the precise terms being proposed.
There can be downsides, however. A reduced salary may affect other things such as the level of life cover being provided, which would normally be expressed as a multiple of the salary in payment (e.g. four times salary). Mortgage offers and redundancy payments may also be adversely affected.
In deciding whether to opt out or stay in, Terry needs to enquire what precisely is being offered and establish the financial advantages to him. He then needs to weigh this against the potential disadvantages referred to above and decide which is most important to him.
Geoff Woodall from Bolton wants to make a comment about the Pensions Protection Fund (PPF). Following the insolvency of his former employer, his pension scheme has recently entered the PPF. Geoff who is drawing an early retirement pension has learnt he will lose 40% of this. He says ‘the fallacy that the media keep on trotting out, that the PPF only reduces pension payouts in the worse case to 90% of the previous benefit needs to be corrected’.
Geoff has a point and, as I commented in an answer to an earlier question, the protection available from the PPF is limited in certain respects. Members already over their scheme’s normal pension age and those in receipt of an ill-health pension have 100% of their pension protected. But for members under the scheme pension age, including those who have taken “ordinary” early retirement, protection only covers 90% of their benefit at the outset and there is similarly only limited price protection after that Also, payments in this category are subject to a cap of 26,050 which is itself proportionately reduced each year for members under age 65.
Information about the PPF can be read on the Pensions Advisory Service website: www.pensionsadvisoryservice,org.uk.
The opinions expressed are Malcolm’s and not the programme’s. The answers are not intended to be definitive and should be used for guidance only. Always seek professional advice for your own particular situation.
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A small number of British Airways passengers face disruption on Monday, as the airline grounds flights to and from Washington. BBC News Online looks at what you can do and what rights you have if your journey has been disrupted.
If my flight is cancelled, how can I get my money back?
British Airways says it will offer customers who were booked on cancelled or suspended flights a refund of the original ticket price, the possibility of re-booking or an alternative route.
BA operates 33 flights to the US each day, and with American domestic airlines offering an extensive range of internal routes, getting to Washington should still be on the cards.
Any compensation over and above the ticket price will be decided upon on a case by case basis, BA says.
Passengers seeking information can ring BA on 0870 850 9850.
What if I’ve already booked accommodation in Washington?
People with accommodation bookings in Washington should contact their travel agent or hotel company to seek alternative travel dates or destinations, or to ask for a refund.
If this is unsuccessful, people who paid using a credit card have another potential route.
If you paid with a card, bought direct, and your ticket cost more than 100, you could lodge a claim with your credit card company.
This is because under Section 75 of the Consumer Credit Act, the credit card company is jointly liable.
This also extends to travel services.
Will my travel insurance pay if I am concerned about the security situation and, in general, don’t want to visit Washington ?
Travel insurance will not cover “disinclination to travel” and many policies have exclusions for cancellations for this type of problem. Check your policy to find out more.
If the Foreign Office, however, deems your destination unsafe, tour operators and airlines will normally step in and offer alternatives.
There is currently no warning from the Foreign Office against travelling to the US, but it has said that passengers should expect more delays at airports and tighter security.
Where can I find out whether it is safe to travel to a particular country - and keep up to date with the latest news?
The first port of call for up-to-date travel advice is the Foreign Office.
Advice can be obtained by calling 0870 6060290 or through the department’s website.
BBC Ceefax page 470 and the government’s UK Online portal also carry the latest warnings.
Where can I get more information about my rights?
The Air Transport Users Council (ATUC) can investigate queries from passengers on scheduled flights.
It can be contacted at: CAA House, 45-59 Kingsway, London WC2B 6TE. Telephone 020 7240 7071.
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