Money matters

Fergus answers money questions on Reporting Scotland and online

I'm Fergus Muirhead and I'm trying to answer any money or consumer problems you may be facing at the moment.

You can contact me by e-mail at [e-mail]

I will deal with a selection of your e-mails every second Monday on lunchtime Reporting Scotland, Scotland Live and on the BBC Scotland news website.

Q1. Dear Fergus

I have £6,000 to invest over the long term. Is it better to add to my pension or pay off some of my mortgage? I am self-employed and know my pension could do with more funds, but if I reduce my mortgage payments I could increase my monthly pension contributions. I have a pension with Norwich Union, but am not able to tell how well it is performing and fear that while the obvious thing is to add to my pension, I am scared it will not perform well. I will be 50 later in the year; does this change any criteria for building a pension fund at all? Thank you for your help. Jean Kerr, Glasgow

Reducing your mortgage will help you to increase the monthly amount you are investing in your pension but you will get an immediate boost to your pension if you make a lump sum payment. Assuming you are working and eligible to invest £6,000 at one time you will receive basic rate tax relief on this investment and the amount invested in your pension will actually be £7,200.

Since you are almost 50 in might be better to have this boost now, rather than dripping your mortgage savings in over the next few years.

You should also ask Norwich Union for an up-to-date statement of the fund value of your pension, as well as a projection showing what it will be worth at the date at which you intend to retire. This will help you see how much more you will need to invest in your pension between now and then.

Q2. Dear Fergus

I am a mature student studying nursing with only a year and a half to go, for years before that I worked in hotels with no pension contributions from myself or employer. With all the talk of private pensions being unreliable and the talk of pensions in the future being affected could you give me some advice on how to plan a pension or what saving accounts would be best. Sarah Gate

As a nurse you will presumably end up working in the NHS. Usually you will pay 6% of your income and the pension will pay you a percentage of your salary at retirement for every year that you work in the NHS. You don't say how 'mature' you are so it's difficult to know how many years you have missed out on paying pensions from previous jobs.

It would make sense to wait until you are working and then have a look the projected benefits from your NHS pension. You will then have a few different options available to you to 'top up' that pension to take account of missing years and at that time you should sit down and look at all of the options and decide which one is best suited to your circumstances at the time.

Q3: Dear Fergus

I seem to have got myself into a bit of bother with my money. I have taken out a few loans and I have a lot of credit card debt and I'm struggling to make the payments every month. I've applied for a new credit card and hopefully I can use that to help pay the payments on my other cards. And I know that I'm not far away from a big win on the horses or the scratch cards, which should sort me out.

I've also got some money tucked away for a rainy day in an ISA and a savings account. My flatmate Nicki says I should use that but I want to keep that for a rainy day. And Deek, my supposed pal, is trying to stick his nose in as usual and find out what's going on but I really don't want him to know the mess I'm in cause I feel really stupid. What should I do? Bob Adams, Shieldinch

First of all you need to tear up your recent credit card application. Adding more debt, and another lender, to the list is not going to help you just now. Then you need to add up all the debt you've got and admit that you have a problem. That's the starting point. If you try to hide it away and not think about it then you will never deal with it. Then you need to work out a budget - what is your income every month and how much do all your bills add up to? Can you afford to make all of the loan payments you need to, and if not how short are you? Be honest with yourself - remember to add everything that you spend.

You then need to speak to the companies that you have debts with and explain your situation. That's the hard bit. But they will want to help you. You need to come up with a proposal for them based on the budget you have worked out. If you don't feel comfortable doing this yourself then go to Citizen's Advice or to Money Advice Scotland. They both offer a free advisory service and will be able to help you find the best way to speak to your creditors.

Remember that not all of your debts have the same rate of interest. So it might be a good idea to list the APR for each debt and then think about paying off the higher rated loans first. You also have to consider the penalties for not repaying loans and debts. Your electricity company might not shout as loud as a credit card company for you to pay them back but if you don't you could be cut off. So you need to prioritise your debt.

Whatever you do don't be tempted by the offers you see in the back pages of some newspapers offering to cut your monthly bills from £600 to £100. They may well reduce your monthly payment but part of it will go to them and you will end up making payments for a much longer period of time.

Above all don't panic, and don't stick your head in the sand. You are not the only person with debt and there are lots of people with more debt than you. Talk to people about your problems. You will be surprised at how much sympathy and help you will be offered.

A series of programmes will be highlighting the BBC's financial literacy campaign RaW over the course of this week. They include River City, where the extent of garage owner Bob Adams' debts become known.