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Personal Finance Risk management

After a French diversion Joe Coten updates us on latest changes in pension rules and the return of index-linked National Savings.


isk confronts us in many shape and forms. I chanced a witticism for example with my new GP in France a few weeks ago for example and immediately it left my lips, I thought to myself: perhaps this isn’t a good idea. But the cat could not be restuffed into the bag from which I had liberated it. I had been nursing a chest infection too long for comfort. Since I associate chest infections with the winter months I was concerned that I was feeling below par thus in the middle of April’s unseasonal heat wave. Loins upwardly-girded I made my way to see le médecin généraliste in our village. After much general conversation we got down to the specifics of my ailment and after investigations, auscultations and no small amount of deliberation, I was duly presented with a prescription listing (in a fairly negative vein) anti- biotics, antihistamines, then a positively cunning cough syrup, a blue inhaler that filled me with ambivalence and a bill for 23 Euros for the consultation. By this time I’d been in the doctor’s study for the best part of an hour and apart from feeling unwell was generally enjoying the urbane banter. Fortunately the waiting room was empty, as clearly Wednesday is a slow day for feeling poorly in our village.

What surprised me was that the prescription list displayed a conspicuous absence of suppositoires. Unthinkable! In the old days a French doctor would as soon neglect to prescribe such a treatment no matter the condition as an English gentleman pass the port in the wrong direction. To contradict Corporal Jones from Dad’s Army, the French have- or perhaps I should say used to have - it may now be safer to say - a definite predilection for this avenue of medicinal administration. With so much bonhomie in the spring air, I thought I’d test his mettle with a little gentle teasing. “23 Euros!”

I exclaimed. Fresh from dealing with several tradesmen’s quotes along the lines of 3,000 Euros for painting the kitchen, I asked the doctor if at 23 Euros an hour he’d fancy coming round and doing a bit of decorating. I have to give Monsieur le Docteur full credit for taking this in his stride, as without changing his benign facial expression he explained that this was not a suitable comment to address to members of his profession, not in France at any rate. I wandered back home off up the country lane not long afterwards wondering if I’d made a faux pas. My doubts were eased the following morning however when a charming emailed dinner invitation arrived in my inbox.

Since you are no doubt reading this article in the hope of sooner or later coming across the odd nugget that will enable you to take up retirement immediately, if not sooner, I’ll turn my attention to some financial planning issues.

The long-trumpeted issue of index-

linked National Savings is finally with us. You can now put away your money for 5 years and sleep easily in the knowledge that your hard-acquired money is making you a return of at least inflation plus 0.5%. A risk-free investment backed by UK plc no less. What could be better! I suppose there is the risk that inflation returns to close to zero. Well, all the experts say that is very unlikely, so that’s reassuring. If the experts are wrong however, it could mean very feeble returns. Probability says it’s not a bad idea as there’s more upside on the horizon than downside. Do bear in mind though that the maximum per person is just £15,000 On a different tack an important change to pension rules came in this year’s budget. Unless you are 50 or over, or alternatively a pensions lawyer or accountant by profession, what follows will be of no interest, so you may as well do something constructive like putting on the kettle and making a cup of tea. (I’d like one as well, whilst

you’re about it; a little milk, no sugar, thanks). There has been in fact a number of changes but let me focus on one or two, as they have a large effect on those with what used to be called unsecured pension income policies and have since been renamed “capped drawdown” policies. The rule change will also affect those about to draw pension benefits by the way. Previously pensioners were allowed to draw up to 120% of the Government Actuaries Department (GAD) rate in income from their pension fund based on age and its size. This has now been reduced to 100% of the applicable rate, so it may be worth looking more closely at the conventional annuity as an option. It was never a good idea to take the maximum income anyway, as this would increase the risk of depleting your fund too quickly and ultimately reducing the income available from it. Now pension funds in capped drawdown for those under 75 are to be reviewed every 3 rather than every 5 years.

Another novelty is that if you have guaranteed retirement income of £20,000 a year, you can then draw down as much capital as you want from your fund. It is not however advisable in most cases to take large amounts of capital from your fund if you wish to maintain income levels later on. You may well also find yourself with a large tax liability, which is a further disincentive but for some people this may well be an avenue worth exploring. My message to anyone affected by these changes is that all such policies should be reviewed as soon as possible. I did say to put the kettle on, didn’t


Barbican resident Joe Coten

is a member of the Personal Finance Society.

He may be reached on 0207 588 9626.


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