Your money queries are answered by Peter Rutherford, senior director of Rutherford Wilkinson Ltd, chartered financial planners.
Q: I am a Brit but have been working in America for a few years. It looks as though my future is there and I intend to become fully resident in the US and probably an American Citizen. I have pension plans that I have built up in the UK and would like to know if I can transfer them to the US.
A: It is possible to transfer a UK pension scheme overseas under what is known as Qualified Recognised Overseas Pension Scheme (QROPS) legislation.
However, there have been problems in transferring to the US because the Internal Revenue Service (IRS) there had issues with regard to the trust wordings that were used.
I do believe that there are some trust wordings that are now IRS friendly. I would suggest that it is probably best to take advice in the US as it is difficult for a UK adviser to be fully aware of the intricacies of their system.
Q: I have just had a letter from my pension provider saying that from next year my protected rights pension will effectively become non protected rights. What does this mean?
A: Your protected rights pension has built up from contributions made by the Government because you contracted out of the State Second Pension, previously SERPS.
They are bringing the rules for protected rights and non protected rights together, which actually gives you greater flexibility. By way of an example, if you are married or in a civil partnership, the protected rights element would have to take into account a dependent’s pension or annuity in the event of your death.
This will no longer be required and the change is effective from April 6 2012. This means that you can have a larger pension than would otherwise be the case. This is at the expense of a survivor’s pension.
Q: I have been given some money by my grandmother and I am thinking about investing it. I do have some loans, including a mortgage, car loan and a credit card, so I could use it to reduce them. What would your advice be?
A: I strongly recommend that you sit down with a fully-qualified independent financial adviser to discuss this. However, my first reaction is that while investment markets can give high returns, they can also give losses as we all know. Your credit card will be particularly expensive unless you are clearing it off each month as a typical APR is in excess of 20%.
You could not guarantee a 20% plus return from any investment at this time. Consequently I think there is a lot of merit in paying off your most expensive loans first.
To request a free Investor’s Guide and with any questions you would like answered please contact me at Rutherford Wilkinson Ltd, Northumbria House, 21-23 Brenkley Way, Blezard Business Park, Newcastle upon Tyne, NE13 6DS. Website www.rwpfg.co.uk . Telephone 0191 217 3340 or email peter.rutherford@rwpfg.co.uk
Rutherford Wilkinson Ltd is authorised and regulated by the Financial Services Authority.