The pension I currently have has been in place for four years I contribute pounds 50 per month to it and I have contracted

The pension I currently have has been in place for four years, I contribute pounds 50 per month to it and I have contracted out of Serps.
In addition, my flat has negative equity of around pounds l7,000. I have a personal loan taken out to cover the cost of recent refurbishment and now on top of this the freeholder has advised that all tenants must pay around pounds 3,000 to cover the cost of general maintenance.My flat is currently valued at around pounds 39,000. I am concerned that the flat won’t appreciate sufficiently to justify me hanging on to it, but I am trapped. I cannot see a way out given my negative equity, current and projected outgoings and inadequate pension provision. Can you help? J B, LondonA: I believe you have every reason to be concerned about the future of Serps In principle it was a good idea.

However, because of escalating costs it is unlikely to be sustained for ever.You have contracted out of Serps which, I assume from the information given, was four years ago when you took out the personal pension, which appears to be the right decision. Contracting out is not a once in a lifetime decision, however. As with most financial planning matters it will require reviewing regularly.Now is the best time to increase your pension contributions. With 19 years to go until your 60th birthday the compound growth on your early contributions will be far more valuable than the growth can possibly be on the last few years’ premiums.

It is therefore essential that you attempt to maximise the level of your investment as soon as you can. Whether this investment is into your existing plan or another is impossible to advise on without analysing the particulars of your present policy.At the age of 41 you are allowed to contribute 20 per cent of your income into a Personal Pension Plan and receive tax relief at your highest rate payable. For example, on a salary of pounds 25,000 per annum your maximum gross investment would be pounds 5,000 per annum or pounds 4l6.66 monthly. As an employee you will receive basic rate tax relief and the “net cost” to you would be pounds 316.66, in the current tax year. Your current investment of pounds 50 per month equates to an investment of just 2.4 per cent of your salary which, even with strong investment performance, is unlikely to provide you with the level of retirement income you would want.On the property front I do not think you should be too concerned about the negative equity in your flat. Property prices are rising faster than at any time since the peak of 1989, with London and the South-east leading the way.I would be concerned by the “general maintenance” bill you are likely to receive.

You do not mention what advice you have already taken on this, but I would strongly suggest before parting with any money that the tenants collectively seek legal advice.You may wish to consider the possibility of switching your existing interest- only mortgage to a repayment one. This will then mean that part of your monthly payment pays off capital which will have the effect of reducing your negative equity with every payment you make. The only problem may be whether the building society will allow this. Currently they will have a legal charge on the property and the endowment policy you have.You will need to obtain a surrender value for your endowment from the insurance company. As you have negative equity the building society may wish to reduce the outstanding balance with this surrender money. Therefore you will need to ask the Building Society first of all whether this switch is possible and secondly check the monthly cost to make sure the repayments are not excessively expensive.

This will depend on several factors such as the outstanding term of the mortgage which was not given.Overall, according to your income/expenditure analysis you appear to have surplus funds which, if the appropriate steps are taken over the next few years, should put you into a much stronger position financially.Bryan Fisher is an independent financial adviser and the financial planning manager at Berkeley Financial Planning in Coventry Readers are invited to write to him c/o The Independent Letters should not exceed 250 words. The advice is for guidance only and no action should be taken without receiving specific and professional advice.. Many people would like to give money to charity but are worried about possibly finding themselves short of income and capital to meet their own financial needs. In an attempt to meet this genuine worry the Charities Insurance Association has devised a new method of giving which allows donors the opportunity of drawing a tax-free income of 5 per cent for their own use, and if they do need to do so they can reclaim the capital in full.
Readers who would like a free information pack should call 01622 606355. The new plan is called Legacy Enhancement and the bequest is invested in a with-profits investment bond managed by Legal & General.The investor can draw 5 per cent from the bond tax-free, while the charity can keep the remaining income and also knows it has a likely future bequest which helps it plan its own future finances. Investors can, however, elect to leave all the income to roll-up in the fund and increase the future value of the bequest.A third option allows the investor to draw the income and then covenant it to the charity, a fourth alternative allows the investor to use the income to buy a life assurance policy which can be assigned to the charity and increases the eventual pay-out when the donor eventually dies.Exactly how much depends on the donor’s age and life expectancy, but a 65-year-old woman could more than double the value of the original bequest.Investors can also make monthly contributions to buy a life assurance policy out of income without actually committing a lump sum at all.New ways of encouraging bequests to charities are more necessary than ever because the calls on their resources continue to increase while all but a handful of high profile charities have seen their annual incomes shrink in the last two years because potential givers think the National Lottery is looking after them.In fact most charities are net losers from the lottery, and urgently need to tap streams of cash and concern.Charities do have tax-exempt status, which means they do not pay income tax on the income they generate and they can claim tax rebates on gifts which individuals have made out of taxed income provided the donors sign a covenant to make annual donations for five consecutive years.So if a top-rate taxpayer pays pounds 60 a year into the scheme, the charity gets pounds 40 from the taxman.But many donors are reluctant to make a five-year commitment in case they are unable to keep it up.. Patrick and Jane Gottelier, both 45, are partners in the Artwork knitwear brand, with outlets such as Harvey Nichols, Fenwick, Liberty and Whistles.