QUESTION TIME

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The Independent Online
I am worried that inflation may be on the rise again and would like to protect my savings without putting the money at risk. My wife and I each have the maximum pounds 10,000 holding in the eighth index-linked issue of National Savings Certificates as well as a further pounds 41,000 in the building society.

It is possible that your building society money will be eroded by inflation but you will need to keep some cash available for unexpected commitments.

You could consider an index-linked gilt for some of the money but perhaps the best approach is to extend your holding in the index-linked National Savings Certificates, which offer a tax-free 3 per cent plus inflation over five years.

Although you each have the maximum of pounds 10,000, you can use a bare trust arrangement to double the amount. The application form for the certificates allows you to hold the certificates in trust for another, in which case you could apply for a further pounds 10,000 to be held in trust for your wife, and vice versa.

I am retired at the age of 52 and have pounds 20,000 that I am considering using to pay off the mortgage. The related endowment policy will mature in 13 years, when my husband will also be retired. The mortgage and the endowment cost pounds 150 and pounds 38 a month respectively. Is this a good idea?

Generally it is a good idea to pay off the mortgage early. The pounds 150 a month you save could be invested in a savings plan, the choice of which will depend on your attitude towards risk.

You give no details of the endowment policy. But if it has been going for a reasonable time, and depending on the projected maturity value, it may be worth running to maturity.

You will already have suffered the worst effects of the policy charges and it should now be an efficient investment. This is especially so if, as is likely, it is a with-profits contract and there is a terminal bonus on maturity.

You can request surrender values and maturity quotations from the life company. But you should not overlook the life cover, which will be in force for the remainder of the policy term.It may prove valuable.

Question Time is answered by an expert panel from Coopers & Lybrand. Write to the Personal Finance Desk at the Independent, 1 Canada Square, London E14 5DL.

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