Ask Noel

My wife and I both have AMP allocated annuity/pensions and each statement lists the financial adviser we saw when we changed from a superannuation fund to an allocated pension/annuity. Since then, the adviser has left and joined a group that sends us emails that have no relevance to us. We've moved from the district and wonder why AMP takes 0.4 per cent of our funds and gives it to advisers who give us nothing in return. I'm not confident explaining this over the phone, so I have written and emailed AMP but it has not responded.

People at your stage of life should be getting ongoing advice. I also believe trailing fees should not be deducted unless they are being earned. Since you've moved, this might be the perfect time to start a relationship with a new adviser who will be able to review your situation and guide you with the fee position.

My wife and I are pensioners, aged 69 and 70. We receive a part Australian pension and I receive a small annuity. Two months ago, we cashed in our allocated pension and put $320,000 in a fixed-term deposit. While that is OK for now, it might not be a good idea to leave it there indefinitely. Our financial adviser says I would be eligible to start another allocated pension fund if I work for 40 hours in any calendar month and make contributions to super. Is there another investment avenue for us that is tax- and Centrelink-friendly?

The main purpose of having money in super is to save tax. There are no benefits from a Centrelink point of view once you reach pensionable age. You and your adviser will need to calculate whether the income from your assets and your annuity is at a level at which you could save tax by placing money in super.

My husband and I have an investment property with a $336,000 interest-only mortgage at 6 per cent fixed for the next two years. We originally rented out the property but this year had to move into it. We have $40,000 in savings for a deposit on a home in the next year. My husband is 34 and earns $96,000 a year. I'm 38 and on maternity leave, so may only earn $20,000 this financial year. Would it be more beneficial to keep saving for a deposit on a new home, or start paying off the mortgage on the investment property? My husband would like to hold on to it for a few more years.

If you are saving for another property in which you would live, you should keep the debt on the present property as high as possible to maintain your tax benefits. The best way is to bank all your spare money in an offset account attached to the current loan. This will not only give you the highest effective after-tax rate on your savings, it will also give you flexibility because you can withdraw all the money in the offset account as a deposit for the new home if you decide to retain the original one.

In 1996, my wife and I invested $2925 in an over-50s funeral benefit fund. In July, I was notified that this year it added $127.87 bonus to the amount and is now worth $5687. To me this seems a very low return. We could do a lot better by investing it ourselves, but there might be other benefits. Could you give some us advice?

The main benefit of funeral bonds is that neither the asset nor the accruing income is assessed for Centrelink purposes. You will need to ask your adviser to do the numbers if cashing in the bond will not adversely affect any Centrelink benefits you're getting now and you feel you can do better yourself, I see no reason why you should not redeem it.

I have three years until retirement and have elected to move my super from the default balanced fund to the cash option. My decision was based on the current economic climate. The forecasts suggest things could go on the way they are for up to 18 months. I could time my return to the default fund but that is a risk in itself. Would I be unwise to leave my savings in the cash option until retirement?

A big factor in your decision is the amount of assets you have for retirement. If you have more than sufficient now there is no reason why you couldn't hold at least five years' expenses in cash because there is no necessity to seek higher returns. However, if a prosperous retirement depends on your squeezing the highest possible returns from your super, you should still maintain a hefty proportion of your money in growth assets. Remember, you might live for at least 25 years after you retire.

I am 40 years old and have had to refinance my house for legal costs. My house is valued at $370,000, with $162,000 owing to the bank. I am a single mother of two and only earn $30,000 a year. Half my income goes to mortgage repayments. Would it be better to sell my house and rent, investing my money elsewhere, or should I continue with my repayments? The cost of rent and my repayments is the same, but my mortgage won't be paid off until I turn 70.

The problem with selling is that you will lose a big chunk of your capital in costs and may well find it impossible to buy again. The drop in interest rates should make it easier for you to cope and even if it does take until age 70 to pay it off, you will at least have a substantial asset at that time, and in need could fund your retirement through the use of a reverse mortgage. I strongly suggest you hold it.

Noel Whittaker is the author of Making Money Made Simple and other books. His advice is general and readers should seek their own professional advice before making decisions. noelwhit@gmail.com.

In a recent column, there was a question from a woman, 64, on cash and super. In part, the question read: "I have $150,000 in super and $430,000 in cash in the bank earning 6.1 per cent. I have to decide whether to put my cash into super before I turn 65. I'm not paying any tax at present." How can she not be paying any tax? She will earn $26,230 interest on the $430,000 cash. Surely, this would have to be declared to the Tax Office. Is the pension taxable?

Thanks to the Senior Australian Tax Offset (SATO), a single pensioner can earn $30,684 a year before paying tax. Once they exceed this figure, an increasing amount of tax becomes payable because SATO reduces on a sliding scale until it cuts out at $48,525. The age pension is included as assessable income.