Don't PIN it down to your telephone number

Card codes ... Tessa rates ... Halifax shares ... single-company PEPs. Your financial queries answered
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The Independent Online
DO you see any flaw in my use of four digits of my phone number to enable me to remember my PIN numbers? HB, Gwent

Yes. The problem is , thieves are aware that people choose memorable numbers for their PINs. A thief who gets hold of your diary or telephone book may well look for obvious numbers.

It can be hugely inconvenient if someone manages to use your plastic cards to withdraw cash. It can be costly, too. Although your liability for losses is generally restricted to pounds 50 at most, there is no cap on what you might lose if the card issuer can prove gross negligence. The banking ombudsman says simply writing down a PIN number is not sufficient evidence of gross negligence, but you should not keep the number with the card (or, worse still, write the number on the card).

A better alternative than using your own phone number or birthday is to use someone else's number or birthday that is not written down anywhere but that you can still remember. You could even consider using a familiar number backwards.

Most banks and building societies let you choose your own PIN number. Some let you choose when you first use a cash machine, some let you choose at any time. Contact your bank if a cash machine does not give you the chance to change your Pin.

CPP (Card Protection Plan) is now marketing a clever credit card-size device called Pincard, which unlocks up to six different PIN numbers, provided you can remember a two-character code, A3, for example. Pincard is not something you would want to get out each time you use a PIN number, so you would still need to have memorable numbers. But it could come to the rescue if you have a memory block. It costs pounds 3.45, including postage and packing. Call O345 585045.

My wife and I are both over 80 and at this age it is difficult to take a long-term view of investments. Some of the better deposit interest rates are found from tax-free Tessas, but these last for five years. What happens to the tax status of a Tessa when someone dies? ST, London

As you say, some Tessas offer good rates. For small balances in particular Tessa rates can be higher than you will find in taxable accounts. So even if the tax-free status of a Tessa is lost and you have to pay tax on all interest credited, you can end up with more interest after tax than you would have got from a normal, taxable account.

Thus, someone who wants to put some money away for three years rather than the five years required for interest to be tax-free may still find a Tessa worthwhile. But you will need to see what, if any, penalties there are for closing the account early.

If someone dies before the end of the Tessa term any interest accrued before death remains tax-free. But after death, the Tessa loses its tax-free status. It becomes a normal deposit account. Interest will be subject to tax in the normal way, depending on the tax status of the person who inherits the account. You cannot inherit a Tessa.

It is much the same with a Pep. Any interest, dividends or capital gains will not be exempt from tax after someone has died. But income and gains up to the date of death will not be taxed.

I read in the Independent on Sunday last week that a balance of pounds 1 in a qualifying Halifax account is now enough to retain the entitlement to free shares. The Halifax booklet seems to say a balance of pounds 100 is needed. Which is correct? RR, Coventry

In a sense, both figures are correct. Now that Halifax's special general meeting on 24 February has taken place, you need keep only pounds 1 in your account until the date of conversion into a bank (expected in June) to retain your right to free shares.

However, the Halifax is recommending that you keep at least pounds 100 in order to preserve your membership rights. The Halifax still has to jump a few more hurdles before it can become a bank and it is conceivable (though unlikely) that the society's plans to become a bank could fail.

The society would then need to revise its plans and hold another vote to get its conversion through. So if you want to play safe, keep pounds 100 in your account.

I hold single-company PEPs taken out in the tax years 1992-93 and 1993- 94. The dividends from these investments are held as cash in the PEP. Does this money have to be reinvested in the same company? How would reinvestment affect the pounds 3,000 limit? CE, Surrey

The cash can earn interest tax-free but, as a general rule, it has to be invested in the shares of your chosen company within 42 days. You can hold only one company's shares in a single company PEP.

If the cash is not invested within 42 days it will be returned to you. However, small amounts of cash that are not enough to buy a whole number of shares or that can be used to pay the plan manager's fee can be retained. Contact your plan manager if you think that you are in danger of breaching the 42 days rule.

Any reinvestment from cash generated by your PEP investments has no effect on the annual pounds 3,000 limit for a single company PEP.

This limit applies only to the amount of money you can put in to the plan in the tax year in which you open it.

q Write to Steve Lodge, Personal Finance Editor, Independent on Sunday, 1 Canada Square, Canary Wharf, London E14 5DL, and include a telephone number.

Do not enclose SAEs or any documents that you wish to be returned. We cannot give personal replies or guarantee to answer every letter we receive. We accept no legal responsibility for advice.

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