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Page last updated at 12:32 GMT, Friday, 29 January 2010

You ask the pensions expert

Malcolm McLean
Malcolm McLean knows plenty about pensions

Find out if you're making the most of your pension with our expert Malcolm McLean from the Pensions Advisory Service.

Click on one of the questions in blue below to skip straight to that answer, or scroll down the page to read them all.


When I claim my pension next year with a full history of NI contributions it seems my wife and I will get a married couples allowance which will be lower than the amount we would both get if we separated. Is this right and fair? My wife currently draws her pension.

The term married couples' allowance is something of a misnomer. A wife is entitled to a state pension on the same basis as her husband provided she has made the necessary national insurance (NI) contributions and has reached state pension age. Where a wife has a shortfall in her NI record, or no record at all, she can claim a state pension based on her husband contributions, of approximately 60% of his entitlement. This applies whether they are separated or not. Under the present rules the husband must have reached his state pension age and have claimed his state pension for this to happen. But from the 6 April 2010 it will be possible for a wife to claim a pension in this way, once her husband has reached the necessary age, regardless of whether or not her husband has claimed his pension.

A person who has divorced before they reach state pension age cannot make a claim on this basis. However they may be able to improve their own pension by using the NI record of their former spouse or civil partner, instead of their own. They may however only use the years for the tax years up to the tax year in which their marriage ended.

I am 63 years old and my husband will be 65 in December. I only paid the married woman's stamp so my pension is only 40p a week. Friends tell me there are changes in April which could benefit me - is this correct?

There are changes from 6 April although I doubt that they will benefit you.

The main change is that it will be easier to qualify for the full basic state pension as the number of national insurance (NI) qualifying years is being reduced from 39 years for women and 44 for men to 30 for both. But these will only help men and women whose state pension age is on or after 6 April 2010.

What you can do when your husband reaches his state pension age is claim a pension based upon his NI record. The pension you could obtain this way would be approximately 60% of your husband's basic state pension.

I am getting close to my state pension age of January 2011. At the moment I would like to work on. Can I defer my pension for 12 months and then collect a lump sum so that I do not pay tax on my pension and earnings. If I can, can I do this at 12 month intervals for say 5 years?

If you do not claim your state pension it will be automatically deferred. So you do not need to take any action if you do not want your state pension straightaway.

If you do in fact delay for a full 12 months you will have the option of receiving a lump sum payment which will consist of the pension you have deferred plus interest calculated at a rate of 2% above the Bank of England base rate.

If you decide to not to claim your state pension when you reach your state pension age you are allowed only to defer once more after you make your first claim.

The first payment of my regular weekly pension of £184.54 was credited to my account on 14th December 2009. My birthday was on the 8th December 2009. Can you please explain if it is correct that the part payment (from the 8th to the 14th) which should have been approximately £158 was not included in my first payment?

State pension payments begin on a fixed pay day, normally a Monday. This can be up to 6 days after you reach your state pension age, currently your 65th birthday if you are a man and your 60th birthday if you are a woman. Part-week payments are not made.

So because of when in the week your birthday fell, unfortunately you have had to wait the full 6 days before being able to draw your first payment.

It's perhaps not much consolation but it is worth pointing out that the same principle applies when the recipient of a pension dies - entitlement to the pension is maintained for as much as 6 days where necessary up to the next payday after the death occurs.

I reach age 65 this August, and will then claim my retirement pension. I will also claim the higher personal tax allowance from April. I am aware that the basic state pension will be increased by 2.5% in April, but cannot find any reference to an increase in the earnings limit (currently £22900) a year for the tax year 2009/10. Is the allowance to be increased in April 2010?

No. Both the higher personal tax allowance of £9,490 and the income limit for age related allowances of £22,900 will be frozen for the tax year 2010/11.

I had a pension scheme with Scottish Amicable years ago unfortunately I have lost the paperwork, they are no longer listed, do you know who has taken them over?

Prudential Assurance took over Scottish Amicable in 1997 and therefore you should make contact with the Prudential. Takeovers and mergers are not uncommon therefore everyone should make sure that their pension provider has their up to date contact details. If anyone is trying to find an old pension scheme they were once members of, they might get help from the Pension Tracing Service on 0845 600 2537.

I am a 63 year old working male with a pension pot of £140,000 pounds in a stakeholder and seriously considering going into a Self-invested Personal Pension (SIPP) - what are the likely pitfalls/gains please?

SIPPs are a type of personal pension which allow you much greater freedom in what you can invest. As well as investing in funds run by insurance companies and financial companies, contributions to a SIPP can also be used to directly own investments, like shares, and amongst other things, commercial property. They are therefore normally seen as appropriate for people who understand investments well. They usually also have higher charges than stakeholders and personal pensions.

Whilst you have a greater choice in what you can invest, you do need to bear in mind that the investment decisions will be yours. You therefore need to make sure you have the time to do the research and keep an eye on your investments. If your investments go wrong, you'll have no one else to blame.

The real question therefore to ask yourself is what extra value might you get by investing in a SIPP and will it be worth possibly paying extra charges for this. And are you willing and able to handle all that is involved yourself?

A couple of years ago they were saying that you could take your pension out early as long as you spent the money on a second home which would then be your pension, can you tell me what happened to this and if it ever came out please?

I think the enquiry refers to a Government proposal made a few years ago to allow pension plans to invest in residential property, this would this normally have involved using a self-invested personal pension (SIPP). However this was withdrawn before it ever got off the ground and therefore such investments are still not permitted. It is however permissible to invest in commercial property. You could directly hold such investments by using a SIPP.

I want to retire at 65, I am 60. My pension lost a lot of money in 2008, about 30%. With five years to go I don't really want to be stuck in cash. Is there anything I can invest in which will give me market exposure but the downside is no risk to capital?

You probably need to talk to an authorised financial adviser about this.

All forms of investment carry a certain amount of risk, not simply that you may get negative returns but that positive returns do not keep up with inflation. However, the 'riskier' investments are also generally seen at the ones with the potential to achieve positive and high returns. What you need to decide upon is what level of risk you are comfortable with. This can be achieved by spreading your savings amongst the different investment types, but a financial adviser can help you build a portfolio that you are comfortable with.

Perceived wisdom is that the closer you are to retirement the better it is to move out of riskier investments such as shares, in preference for more stable options such as, bonds or cash. While these later types of investment may not offer the potential for exciting returns, they normal offer more stability, which is useful when you are working towards a fixed retirement date.

Most company final salary pension schemes are in deficit. Is it worth considering moving from a company scheme, where I have a deferred pension, to a private pension scheme? Would my pension be safer elsewhere? What needs to be considered if I wanted to go down this route? How much strain is the Pensions Protection Fund (PPF) under, considering the number of companies going bust!

While an employer remains solvent they will have ongoing responsibility to adequately fund their final salary pension scheme. This responsibility is monitored and policed by the Pensions Regulator.

If however an employer becomes insolvent and the scheme is underfunded, (i.e. its assets are inadequate to meet all its liabilities) help to members may be available from the PPF. Pension Protection Fund provides two levels of compensation, as follows:

For individuals that have reached their scheme's normal pension age or, irrespective of age, are either already in receipt of survivors' pension or a pension on the grounds of ill health, the PPF will generally pay 100% level of compensation.

For the majority of people below their scheme's normal pension age the Pension Protection Fund will generally pay 90% level of compensation, subject to a cap equating to £28,742 at age 65.

You should therefore bear in mind, the help that is available, if the worst were to happen. You should also remember that moving final salary scheme to a private scheme means you are moving from a scheme where the pension you can expect is known into one which is dependent on investment returns and is therefore much less certain. However, if you could be affected by the cap and you have reason to think your former employer may become insolvent you may want to give some thought on the merits of transferring out. It would however sensible to obtain financial advice before doing so.

The PPF is supported by a levy on pension schemes and also has the benefit of taking in resources from schemes which come under its wing. Its investment strategy is long-term designed to meet liabilities as when they fall due. The PPF claims that there is no threat to its ability to pay pensions either now or in the foreseeable future.

The views expressed are those of Malcolm McLean not the BBC.

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