Questions Of Cash: Heat still on after cooling-off cancellation

Q. I took out a Lloyds TSB graduate loan insurance policy, which turned out not to be worth the paper it was written on. I had an operation in April, the day before my job ended, and was signed-off for six weeks. I then found the policy did not cover me, as I had been on a two-year fixed-term contract that had not been renewed.

Now my illness has flared up again, I've used up all my savings to find work and Lloyds TSB's policy will not even cover my loan repayments. I paid over £1,300 for this insurance. AH, by e-mail.

A. There are many concerns about the value of payment protection insurance (PPI) policies. Improving the quality of advice and marketing of PPI is a priority for the Financial Services Authority. In this instance, we have been able to help and Lloyds TSB has paid you £1,112.58 after reconsidering your claims. A claim for unemployment had been rejected because you resigned, but Lloyds TSB accepts this was on medical advice. The bank says it is not required under the policy terms to accept the claim, but it is "appropriate" in the circumstances and is using its discretion to approve this.

Q. My son subscribed to the 3 mobile service in October 2005. He was given a wrong handset, which he returned that month. Not having heard more, he cancelled his contract within the 14-day cooling-off period, but the account was not closed. Now he is receiving calls from a debt collection agency. My husband and I have paid bills of £265.88 to avoid the stress; 3 promised to repay this, but no repayment has been received. JS, Halifax.

A. 3 says that the problem lies with the retailer, which failed to process your son's cancellation. The dealer has now repaid you the £265 and 3 has sent your son £100 as a goodwill gesture. Your son's credit reference file has also been amended.

Q. My husband, who is 70 and in poor health, has received a cash legacy. He wants to pass £7,500 of it to his three Australian grandchildren, aged 13, 11 and 6. He wants the income to be accumulated and for each to be able to use the money at 18. He does not want the income taxed as his. RB, Oxford.

A. Stephen Pallister, tax and trusts partner at Charles Russell says the money could be passed to each grandchild using a "bare trust", meaning each grandchild will become fully entitled to the money at 18. "Until then, it will be held by the bare trustees - the parents probably. The grandchildren cannot demand the money until they are 18 - though it can be spent for their benefit before then. The income will not be taxed as your husband's - it will belong to each child and taxed as theirs.

"If the person whose estate your husband has received the legacy from died in the past two years, your husband should enter into a 'deed of variation' of their will, to redirect this money to his grandchildren. In this way the gift will be treated as if it was made by the deceased on his death for inheritance tax (IHT) and capital gains tax purposes.

"If the person died more than two years ago, the gift must be made by your husband. An individual can gift £3,000 each year IHT-free, by use of their annual exemption, plus any unused exemption from the previous year. The remaining £1,500 would be a potentially exempt transfer (PET) for IHT and fall out of account for IHT if your husband survives seven years."

Q. In 2005 I signed up to the Utility Warehouse for broadband. The lines to our rural home were inadequate so the contract was cancelled, but the Utility Warehouse was still to supply the standard phone service, charging for calls and line rental.

In late 2005 the phone lines went down for nearly three weeks. The Utility Warehouse charged line rental despite this interruption, saying any compensation must be paid by BT, as it is responsible for line maintenance.

The Utility Warehouse ultimately credited us with £2.05, refusing to repay line rental charges. I refused to pay the £16 charge, cancelled the contract and I'm now threatened with court action. Why should I have to pay for a service I didn't get? CB, North Wales.

A. Ravi Khanna, a spokesman for the Utility Warehouse, says: "We cannot guarantee that our provision of telephony lines and services will be without fault as there are often reasons, completely outside our control, which lead to services being disrupted.

"When this happens, while we will do all we can to work with our providers to resolve the problem, we do not accept liability for the disruption, nor are we obliged to provide compensation for any period of time that a customer may be without service."

However, the Utility Warehouse has credited your account with the outstanding balance of £15.83.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at

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