Questions of Cash: It's time to shop around fund supermarket

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My Scottish Amicable three-year Pep that paid a monthly income matures in March. I decided to reinvest in a new Scottish Amicable Pep to keep the tax benefits of a Pep, but was told I must transfer to an M&G Pep with no closing date and variable income. I am asked to choose from four M&G Peps. I prefer medium risk, with the emphasis on income. I read in your paper about an Intelligent Finance Isa: should I transfer to this? JR, by e-mail.

My Scottish Amicable three-year Pep that paid a monthly income matures in March. I decided to reinvest in a new Scottish Amicable Pep to keep the tax benefits of a Pep, but was told I must transfer to an M&G Pep with no closing date and variable income. I am asked to choose from four M&G Peps. I prefer medium risk, with the emphasis on income. I read in your paper about an Intelligent Finance Isa: should I transfer to this? JR, by e-mail.

Mark Dampier of the adviser Hargreaves Lansdown says: "This appears to be a maturing investment. You cannot transfer it to an Intelligent Finance Isa because that is a cash Isa and the rules do not allow you a transfer from an investment Pep/Isa into a cash Isa.

"You do not have to use the M&G funds. I would transfer to a supermarket, such as CoFunds or Fidelity, allowing choice from a range of investments. If you want income with some risk, I suggest an equity income fund. The net yields are about 3.5 per cent and the income should grow alongside your capital.

"If you have £6,000 or more you might split it among three high-quality income funds, such as Liontrust First Income, Invesco Perpetual Income and Framlington Income."

Philippa Gee, of the adviser Torquil Clark, says you should confirm the maturing sum you are due, because not all plans guarantee a return of capital invested. She suggests you consider whether you are comfortable investing in bonds.

She adds: "M&G has income funds so if you want to keep it within the M&G stable you could look at the M&G Dividend Fund. Should income be a greater priority then you look at a corporate bond fund such as M&G High Yield.

"But remember, most of the return comes in the form of income and not capital. You might consider combining both funds, giving a mix of equities and bonds."

I am 52. Three years ago I had a stroke and was diagnosed with high blood pressure and my kidney functioning at 50 per cent. My blood pressure is under control and I have no other neurological or physical impairment. I have been offered a 15-year mortgage, but insurers have refused life cover. What do you suggest? ZA, by e-mail.

Some underwriters specialise in life cover and critical-illness policies for people with serious medical conditions. Premiums have a 30 to 200 per cent loading, depending on the condition. You should speak to a health specialist financial adviser, such as Dr Penny O'Nions at the Onion Group (01753 652000).

I am the treasurer of my local branch of a society which has a balance of £1,000 in a Lloyds TSB current account, plus £1,000 in its business instant access savings account paying just 1 per cent interest. Could we do better elsewhere? AS, Fareham.

The best rate for a club with £1,000 in an instant access savings account is 3.6 per cent in an Alliance & Leicester community business reserve account, says Business Moneyfacts. You could also earn 0.5 per cent interest on a Business Gold current account with Norwich and Peterborough Building Society.

Our mortgage is backed by an endowment issued by Legal & General in 1989. Since we moved to a new property in 1996 we have had no correspondence from L&G and assumed our endowment was performing to projections.

After reading reports in The Independent's Save and Spend, we phoned L&G to check the state of the policy. L&G had sent correspondence to our past address, although we had notified them of the move.

Apparently we are in the "amber" group and our policy may not pay off our mortgage. When we were sold the policy by a financial adviser we were assured it would cover the mortgage and provide a lump sum. Surely L&G had a responsibility to keep us informed of progress on the endowment. What can we do about the sales advice? R&AD, by e-mail.

Legal & General is required to send you a reprojection letter at least every two years. You can claim against the company and on appeal to the Financial Ombudsman if you believe its failure to do this caused you a loss.

An example might be that you would have set up a repayment mortgage alongside your endowment if you had been told of a potential shortfall and your failure to do this may cost you more. You also appear to have grounds for a complaint of mis-selling, which should be pursued first with the advisers that sold you the policy.

If you have questions, write to Questions of Cash, 'The Independent', 191 Marsh Wall, London E14 9RS, or e-mail cash@independent.co.uk. We can reply only to letters published. Please send copies, not originals.

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