Halifax shares are due to start trading on the stock market on 2 June and many people who want to hold rather than sell will be looking to put them in a PEP, to make returns tax-free. But the Halifax PEP does not look the best choice for many people, particularly those due other windfalls. It will not hold any shares other than those of the Halifax and will carry charges that outweigh the benefits to many basic-rate taxpayers.
The 7.6 million qualifying Halifax savers and borrowers have been sent details of the number of shares they are due, and must return a form stating their intentions by no later than 26 May. Fidelity is reminding people to make sure they opt for a share certificate if they want to hold shares in a PEP other than that of the Halifax.
But this process might not be straightforward. The share certificate option is only given on the back of the Halifax form for those choosing to keep their shares, and unless you sign this form on both sides you will not get a certificate; instead your shares will be held by the Halifax on your behalf. Likewise, if you tick the box on the form asking for information on the Halifax PEP, you will not get a share certificate. "It's a shambles," claimed a Fidelity spokesman.
A Halifax spokesman admitted that the form was structured to "default" people into not getting a certificate, because for most people it would be unnecessary and because of worries that the City's share-dealing systems might become overloaded if these people then sold. "We don't want people inadvertently getting certificates," he said.
He also claimed that having shares held by the Halifax in its Shareholder Account initially would not prevent people getting certificates subsequently, for free and in time to put the shares in another company's PEP.
Fidelity's PEP looks attractive because it will make no charges until April 1999 for holding any number of different windfalls, and no charges thereafter if you make some further investment with Fidelity by that date.
Halifax savers (as well as those with the Alliance & Leicester, whose shares were handed out last month) are also now free to move their money to other building societies without fear of losing their windfall, with the caveat for Halifax savers that they still need to keep a qualifying account open until the conversion is complete.
The May issue of Which? magazine suggests that savers and borrowers might be well-advised to switch to the remaining mutual building societies for better rates over the longer term. These include the Nationwide, Bradford & Bingley and Yorkshire. They might also yield further windfalls in the future, whatever they say now.
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