The Times - UK (2020-11-14)

the times | Saturday November 14 2020 1GM 71

Money

“I

am 65 and a former motorcycle
and road-racing champion. I live
on the Isle of Man and am now
getting ready to retire, but my plans
have been left up in the air by Phoenix
Life, my pension company.
I have a long-standing personal Isle
of Man pension, which I originally took
out with Pearl Assurance, which is now
being run by Phoenix Life. In the Isle of
Man, under so-called triviality rules,
anyone aged 55 or over is allowed to
withdraw their entire fund in one go if
its value is under £100,000. This is what
I wanted to take advantage of.
On March 25, Phoenix sent me a
statement to say that my pension had a
value of £90,584.55. I filled in a form
saying I wanted to withdraw it to take
advantage of triviality rules, but I did
not hear anything back. I telephoned
the company on April 28, and was told
I would be sent additional forms before
it could process my request.
This is when the farce really started.
I was sent the wrong forms on several
occasions, before being finally told, on
August 24, that my pension had exceed-
ed the £100,000 triviality threshold on
May 5. I have been dealing with nine
separate individuals, involving 46 let-
ters. The company has offered £500
compensation, but I refused it, feeling it
is inadequate, and would like to with-
draw my pension as a lump sum.”
Martin Bullock, Isle of Man

Troubleshooter says
The Isle of Man is a self-governing
crown dependency with full financial
independence, so its pensions are run
under different rules to the UK.

Getting my

Isle of Man

pension is no

trivial matter

Martin wanted to take advantage of

trivial commutation rules under the is-

land’s pension freedoms that came into

force in April 2018 and raised the size of

pension you could withdraw in its en-

tirety from £50,000 to £100,000.

Shellie Wells, a spokeswoman for

Phoenix Life, told us that Martin had

misunderstood the form he filled in on

March 25. She said it was not an official

“request” form to activate the transfer,

but a statement of intent and that it was

made clear in the documentation that

Martin should also ring Phoenix.

“No triviality form is included, but the

option is explained,” Wells said. “We do

set out the criteria and request that cus-

tomers call to discuss the options and

also requested that Mr Bullock advised

us of his instruction by April 18.”

The company received a phone call

on April 28, Wells said. “It was at this

point that we knew that Mr Bullock

wanted to take triviality option.”

Wells acknowledged that the fund

value had still not “tipped over

£100,000” until May 5 — after he made

his request.

She said: “We are satisfied that from

the point Mr Bullock contacted us for

the triviality pack, on April 28, until the

time the fund went above £100,000, on

May 5, there was insufficient time for

the documents to be sent, received,

completed and returned.”

However, Phoenix said it “recognises

how frustrating it would be for him not

to make use of this particular option”,

and it is talking to the Isle of Man Trea-

sury to see if it will make an exception

so Martin can withdraw his money.

David

Byers

Troubleshooter

Phoenix Life delayed so

much that I missed the

withdrawal deadline

Will equity release work for my son?

“I want to buy a flat on the south

coast for my son, who lives in Japan,

in case he ever returns to the UK.

The only way I could afford this is

through releasing equity on my

house, but I do not want to

jeopardise my home.

I am 72, in good health, and live in

a mortgage-free 1960s town house

in a London suburb worth about

£600,000. I want to release about

£180,000, but would like to

understand what level of debt I may

incur in interest. If, for example, I

paid compound interest on the loan,

what would the company I borrow

from be entitled to claim back when

the house is sold in, say, 15 or 20

years? I’m concerned that my entire

property will be swallowed up by

debt, so there would be nothing left

to give to my two other children

after I die. Could at least two thirds

of its value be protected for them?

My son would not live in the

property initially, but I want it to

be in his name and would like to

understand the tax implications of

this. He doesn’t own another home.

I would not be looking to let the

property, but to use it for family

breaks, so other members would

contribute to running costs.

Is this a feasible plan or am I

living in cloud-cuckoo land? Ever

since I registered my interest on an

equity release company websites I

have been bombarded by calls and

emails, but I just don’t know

whether to trust them.”

Katherine Grosvenor

South London

Troubleshooter says

Equity release loans are almost

always offered as lifetime mortgages

which are repaid when the house is

sold — usually when the borrower

dies or goes into care.

Any interest accrued is paid at the

end and, because it compounds the

debt can grow quickly. Many loans

come with exit fees of 10-15 per cent

if you pay them back early.

Since 2014 anyone seeking equity

release must take financial advice.

Your age determines how much of

your house value you can release,

but the maximum is 60 per cent.

Katherine wants to borrow just

over 30 per cent and the lowest rate

available for her is 2.28 per cent

from Pure Retirement or More2Life.

Ray Boulger from the broker John

Charcol said it would take just over

30 years for the debt to double to

£360,000.

The best option, if she can afford

the repayments, is to set up an

interest payment plan. This means

she would pay off the interest that

accrues every month so the debt

would never grow. Then, when her

house was sold, she would just pay

back what she originally owed.

If she did not make repayments

she would owe £252,425 after 15

years and £282,544 after 20 years.

It is possible to ring-fence part of a

property under the terms of equity

release loans, so that she could

protect the interests of her other two

children. Boulger said: “She would

not be able to ring fence as much as

two thirds of the property’s value,

however, and the interest rate would

be higher, which means the debt

would compound quicker.”

When it comes to tax, Katherine’s

gift to her son will not be liable for

inheritance tax as long as she lives

for seven years after making it. He

may be subject to capital gains tax if

he later sold the property and it

wasn’t his main home, but at the

moment that is not an issue. They

may wish to buy the flat before April

1 so that he avoids a 2 per cent

surcharge being introduced for

expat purchasers.

Write to Troubleshooter,

Times Money, 1 London Bridge

Street, London SE1 9GF or

[email protected],

including your phone number

ILLUSTRATION BY CRISTINA ERREA

The problem for young people

is one of supply and demand.

(Introducing the new second-

class citizens, November 7).

As more people use gifted

deposits, the bar is raised

against people whose parents

cannot afford to help. But

that is only true because of

the lack of housing. With

sufficient properties, prices

would be lower and more

people could get on the ladder.

Ian Tinn

NS&I’s service during the

pandemic has been

appallingly bad (Dear Ernie,

why don’t you write any

more? November 7). They

blame it on reduced staffing

caused by social distancing

requirements. But how come

some commercial banks have

managed to maintain their

standards of service? NatWest,

for example, has a system

which offers the option of a

call back when your turn in

the queue is reached. Lloyds

uses voice recognition to

avoid tedious identification

procedures.”

Frobisher

I tried to create an account,

but got a message saying:

“Temporary password expired,

please contact us.” I rang

NS&I and got a recording

suggesting callers should use

the internet since they were

short of staff. It added that the

waiting time was one hour

and that abuse of call centre

staff would not be tolerated.

Stuart Hogan

NS&I has changed its

website, which has become a

nightmare to navigate. In the

past you could log into your

account on the home page,

now you have to navigate

through a maze to get into

your account. This is the worst

website I have come across.

John Gray

My mother died recently and

although I am her NOK, heir

and executor it has been a

nightmare trying to close her

Income Bond account. The

website is useless and the

waiting calls for a telephone

call are unacceptably long.

I eventually got the correct

form and sent off a copy of

the grant of probate, only to

be told (two weeks later) that

I need to send the original.

(Even though the same

letter says that a copy is

acceptable!) Still waiting.

What a shower!

Sandy Heath

Registering online is for the

convenience of NS&I, they

can’t mandate registration and

have no right to withhold

winnings. Anyone who

receives a claim letter should

write back with instructions

on how they wish to be paid.

Stephen Broadhead

I do not want to conduct my

life online. I do not want to

waste my days waiting for

someone to answer the phone.

I do not want that sick feeling

every time I am faced by an

administrative chore that

involves contacting an

organisation. I am a human

being. I want to be treated like

one by other human beings.

I understand the economics

of getting rid of staff and

replacing them with systems.

Doesn’t make it easier to bear.

Karen Holmes

Individuals working from

home are now allowed to

claim tax relief of up to

£124.80 on heating costs (How

working from home can be

cheaper than going to the

office, October 31). However,

given that most of us have

now been instructed to stay

at home — regardless of

whether or not we’re working

— and not frequent pubs,

shops or public transport,

we too will incur similarly

increased costs. Should not

these tax allowances be

extended to everyone?

Harold Lebaril, via email

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at thetimes.co.uk unless

stated otherwise

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