Personal Finance: Gainful resolutions

Losing weight is one thing, but saving money is a resolution that it pays to keep
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The Independent Culture
Every New Year, , I make a series of resolutions. Mostly, they are to do with health and fitness. To be honest, I rarely stick to them: they demand constant application - and I am congenitally lazy.

Financial resolutions are different, however. Once you have carried out the particular task you set out to, that should be it. Except that in this case, you could be hundreds of pounds better off.

Here is my list of things to do in 1999. Some of these ideas have already featured in The Independent. If you haven't yet taken advantage of them, it will almost certainly pay to act on them now.

n Find more competitive home/ contents and motoring insurance. It is a sad fact that most insurers rely on policyholders' inertia to make money. This literally means that many will offer a highly competitive quote in the first year, only to rack up premiums in sub- sequent years.

They expect that you will stay with them for at least two or three years before you tire of their high prices. Ten minutes' worth of phone calls to obtain a better quote, on the other hand, could save you a fortune.

One relatively new insurer on the block is Liverpool Victoria Friendly Society. The company is at present heavily undercutting most of its rivals in a bid to grab more business. In practice, this means many of its premiums are up to a third cheaper. Give it a try on 0800 608608.

n Paying off the mortgage early is most people's dream. Here is one way to do it: take out a 10-year fixed-rate loan with FirstMortgage, pegged at 5.95 per cent, and get it over and done with in that period.

The interest savings could be vast. Using the 10-year repayment option would mean that a pounds 50,000 mortgage would incur total interest charges of pounds 17,773. By contrast, a 25-year repayment loan, even at FirstMortgage's good value 7.7 per cent variable rate, would mean paying pounds 64,112 in interest, pounds 46,339 more. FirstMortgage's number is 0800 080088.

n Every year, PEP companies flood newspapers with adverts designed to sell you one of their financial products. The hard sell may be repugnant, but there's no denying that for higher-rate taxpayers who want to set aside fairly large sums every year, tax-free savings schemes are a good idea.

Key to the process is finding the right funds to invest in. If you are not an expert investor, IFA Promotion will supply you with a list of three independent financial advisers based in your area. They are now listed according to their expertise. Call 0117 9711177.

If you don't want to pay heavy commission and know what to invest in already, the (oddly named) Building Society Shop has a nifty idea. It sends you a guide which allows you to select an appropriate PEP, based on a flow chart which gives you a range of up to 16 different investment options. In some cases, not only do you save up to pounds 300 in commission - they pay you to invest your money. Call 0321 237823 (freephone) for your guide.

Alternatively, you could try the similarly-named ISA Shop for hefty discounts that could, in some cases, not only mean no initial charge at all for investing in a PEP, but you could get back in cash up to 0.75 per cent of the sum invested paid to you. The ISA shop has dozens of PEPs to choose between, from its own comprehensive (and free) 64-page guide. Call 01777 839205.

n By now you will be rather sick of being told that you should be pumping more money into a pension. The fact remains, however, that most of us are grossly underfunded when it comes to our retirement income.

Moreover, the taxman is extremely generous in helping us save. For every pounds 60 paid into a pension by a higher-rate taxpayer, the Inland Revenue offers a further pounds 40. In practice, this is an automatic 66 per cent overnight increase in the value of your initial investment. It is also possible to go back up to six years and make use of unused allowances. You have until 5 April to decide where the money should go.

The key to successful pension saving lies in minimising the cost of contributions into a scheme, especially initial charges. Which is where Torquil Direct Choice comes in. The company has negotiated with a number of leading pension providers - Standard Life, Scottish Widows, Scottish Life and CGU - whereby it will offer one of their pensions.

Instead of hefty commission fees, Torquil Direct Choice will charge just pounds 50 plus VAT to set up the pension. Torquil also receives a small "trail" commission for as long as the plan is kept going.

The result, according to the company, is that assuming the same rate of growth, a pension fund set up with Torquil Direct would be worth more than though other self-professed ultra-cheap providers such as Tesco or Virgin Direct. Call 08000 561836.

n Life assurance is something anyone with a family needs. It is also virtually mandatory when buying a home.

Over the past few years, term assurance has gained in popularity. This is where you set a term, say 10 or 20 years, and insure your life for a sum that is chosen by you. You then pay a regular monthly premium. If you die within that period, your estate collects. If you don't, it doesn't.

Surprisingly for such a "plain vanilla" product, where mortality risks are similar for all insurers, premiums can vary wildly. But a new company, Life-Search, aims to subvert all that high-charging nonsense.

Quite simply, Life-Search promises to undercut the price of any policy sold on the market. If you can find a cheaper quote, it will beat it.

For example, a non-smoking female aged 40 could obtain cover that pays out pounds 200,000 in the event of death within 20 years for pounds 28.35 a month. Norwich Union, by contrast, would charge pounds 52.80 for an identical policy. Call Life-Search on 0845 6030401.

n Finding a decent home for your savings where you also receive relatively speedy access is hard to achieve.

In recent weeks, the new Egg Savings Account has been in the spotlight, thanks to the 8 per cent gross rate of interest it has paid savers since its launch in October. This rate is now set to drop to 7.25 per cent. Despite this cut, Egg, which is owned by Prudential, is still a highly attractive place for your savings.

Even so, almost nine out of 10 can't be bothered to shop around for the best rate on a monthly basis, and 85 per cent say they haven't done so in the past five years. Only 7 per cent do so every three years.

For savers who prefer not to open a savings account only for the initially attractive rate to start sinking below its competitors a few weeks later, there are two options.

One is Virgin Direct. The company's new instant-access Deposit account offers a rate of interest guaranteed not to be more than 1 per cent below the UK clearing-bank base rate - until December 2001. Right now, that means 6.25 per cent gross, though that may fall shortly.

Alternatively, First Active, best known for its highly flexible mortgages, has launched a Fairdeal account, promising the average of the 20 highest- paying instant access accounts on the market. To spice things up, First Active is taking the average interest of the top 20, paid on balances over pounds 10,000 - where rates are usually highest, currently 7.16 per cent gross - but in Fairdeal's case, applying it to a minimum balance of pounds 1,000. Call 0800 558844 for details.

n Finally, if Christmas shopping has caused near-terminal damage to your credit card, it is time to switch. Capital One Bank, a leading US card issuer, offers two alternatives. One is a card with a 6.9 per cent APR introductory rate until 31 July. The other is a rate of 9.9 per cent APR until 2001. Both cards have the usual 54 days' worth of interest- free credit. And they charge no annual fee, unlike many of their rivals. This one is a no-brainer. Call 0500 200400.