John Husband answers your personal finance questions
070307 - Inheritance Tax, care annuities
260207 - Contents insurance, shares, bills, mortgages
050107 - Inheritance Tax, NI contributions
051206 - Downsizing, second homes
301106 - Savings, house prices, care
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Personal finance Q&A - 260207
In the latest of his regular Q&As, Saga money expert John Husband answers your personal finance questions:
Q: Our daughter has been offered a place at university starting this autumn and will be living away from home in student accommodation. Will she need separate insurance for her belongings?
A: She can get separate contents insurance but many insurers will cover her on your household insurance if she will be away from home only during term time. The extra charge is usually less than a separate stand alone policy and some offer it for free. Do check that the amount of cover will be sufficient as most students will have costly items with them including laptops and iPods.
Q: My wife and I jointly own nearly 1,000 HBOS shares resulting from the Halifax demutualisation. If we sell them will we have to pay income tax on them?
A. No. There is a potential liability to capital gains tax on any gain made since you first received the shares. You can each make capital gains of up to £8,500 in this tax year before being subject to tax, and your shares are worth less than £11,000 in total.
Q: I’m sure we’re paying too much for our gas and electricity but we’re not into computers. Is there any other way to find a cheaper provide?
A: Yes. Energywatch, the official energy watchdog, has a special Switch Without Any Trouble – SWA – helpline. Just call 0845 688 9594.
Q: We cashed in our endowment mortgage because its performance was so disappointing and used the money to pay off part of what we owe, but still have £30,000 outstanding on an interest only mortgage. I don’t think we can afford to switch to repayment. Any suggestions?
A: If you shop around for a mortgage deal the monthly repayments need not necessarily be that much greater. Talk to your mortgage lender or, better still, a mortgage broker. Consider some life protection for your new mortgage, as this was previously included in the endowment.
Q: I have finally cleared my mortgage after 35 years as a homebuyer. My mortgage lender is suggesting I leave a nominal £1 owing and they will then continue to look after my deeds. Would it not be better to clear the account and have the deeds kept safe at home or with a local solicitor?
A: I think it is a good idea myself and I have just accepted a similar offer from my mortgage lender. That’s because I believe the deeds are probably safer with them than at home or at a local solicitor’s office which could get burgled or burnt down or the firm might close.
Q: I have been investing in shares and unit trusts through PEP and ISA plans for many years. I would now like to avoid the risk of stock market fluctuations but at the same time continue to have some protection against inflation. How about Index-Linked Gilts, for example?
A: Gilts, including Index-Linked Gilts and bonds carry the risk of capital loss if interest rates rise. Index-Linked Savings Certificates are worth considering as an alternative for at least some of your savings as they offer some income and protection of your capital against inflation.
Q: My partner and I are both retired and considering getting married. We each have investments in our own names, shares bonds, etc. We are going to change our wills but is it possible to keep our investments in our own separate names, or could this result in legal problems?
A: No, it shouldn’t. However there may be tax advantages in rearranging who owns what, if, for example one if you is subject to a higher income tax rate. Before altering your wills I suggest you first talk to an independent financial adviser who can recommend some tax planning.
Q: We have run up a lot of debt on credit and store cards and are having difficulty getting straight. We have seen and heard lots of adverts for debt advisers on radio and TV but how do we choose a reputable one?
A: I would avoid commercial debt advisers and seek help either from a debt adviser at your local Citizens Advice Bureau or contact the Consumer Credit Counselling Service – 0800 138 1111.
Q: I’ve been considering buying a pre-paid funeral plan. But is there any protection against the company going bust?
A: A very good question. Depending upon what plan you choose, your money is either invested into a trust fund with trustees, or in an insurance policy, which is then used to pay for the funeral, whenever that turns out to be. The aim of both methods is to safeguard your money until it’s needed, ensuring that it’s used to provide the funeral you have paid for. However no plan provider is authorised by the Financial Services Authority so its compensation schemes do not apply to funeral plans. Before signing up, ask what protection is in place against the company failing – and choose only a company which you feel you can trust.
Q: I have an £18,000 projected shortfall on my mortgage endowment and have been offered just over £1,000 redress for mis-selling. Can this be right?
A: Yes, it may well be. Most borrowers have been alerted to the possibility of mis-selling by the shortfalls which have emerged on mortgage endowment policies. But you can only stand up a claim for mis-selling if you can demonstrate either that you were misled by the seller, or that it was too risky an investment for your personal circumstances. The compensation is intended to put you back where you would have been had you chosen a straight repayment mortgage at the outset. That may or not happen to coincide with with the size of your shortfall.
Q: We would like to purchase a retirement home abroad. Would it be possible to release equity from our existing home to pay for it?
A: That is a possibility. Talk to an independent financial adviser about it but before you do, ask yourself whether your existing home is now larger than your current needs. It may work out a lot cheaper to raise the money by trading down to a smaller cheaper home here, and funding your overseas purchase with the difference.
Q: I’ve been told my with profit bond fund is now closed to new business, What does this mean?
A: The fund will no longer accept money from new investors. In the short term this should not make much difference to you, but it may not perform as well in the future because the money may be invested more cautiously. So, unless your bond is due for repayment soon, I suggest you seek independent financial advice.
Q: I am approaching 70 and because we live in the country we need a car to get around. Will I have difficulty getting car insurance as I get older?
A: This can be a problem. A recent survey showed that 15% of insurers don’t cover the over-seventies and nearly 40% refuse cover to those over 75. I suggest that you check the attitude of your present provider. If they are unlikely to continue giving you cover I suggest you talk to an insurance broker.
Q: We have been avoiding putting money into shares ISAs after losing quite a bit of money in the post-millennium shares crash. Now the stock market is looking much stronger would you recommend putting money in a shares ISA before the end of the tax year?
A: The stock market has made an impressive recovery in the past three years. Shares are by no means as expensive as they were at the end of the last shares boom. But they are not that cheap either. If you want to invest in a Shares ISA I recommend that you drip-feed money in month by month rather than putting a lump sum in now. Because so many investors tend to pile in towards the end of the tax year, share prices tend to get pushed up artificially in March each year.
Q: Is it better to shop around for the best deal on separate buildings and contents insurance?
A: I don’t think you would necessarily save anything as insurers usually offer a discount if you buy a combined policy. Of more importance is the danger that by having two separate policies you may have gaps in your cover because insurers may define differently what counts as buildings and what as contents. If everything in your home is covered by the one policy then any claim must be covered by one or other section.
* John Husband's answers represent his own opinions and are for general information only. Always seek independent financial advice. Email John your personal finance questions at web.editor@saga.co.uk
This article was created: 26 February 2007.
This article was last edited: 30 April 2007.
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