Take your last puff and filter out big premiums

News: Insurance reward for smokers who quit; mortgage rate rise at Scottish Widows; HBOS sets up £130m compensation fund
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The Independent Online

Planning to kick the habit on National No Smoking Day this week? You could kick high insurance premiums as well.

Planning to kick the habit on National No Smoking Day this week? You could kick high insurance premiums as well.

Those giving up on Wednesday will be able to slash their life cover, according to independent broker LifeSearch, but you'll have to stay off tobacco for a year to qualify.

"Most companies class smokers as non-smokers once they have given up for 12 months or more," said spokesman Kevin Carr. Those planning to stop should remind themselves to rearrange their policy at that point, he adds.

Calculations from the price- comparison service insure-supermarket.com suggest that a 35-year-old male smoker can pay £98 a year more for the same cover compared with a non-smoker. Savings of nearly 50 per cent are available if they stub out the fags once and for all.

Smokers close to retirement and with no intention of giving up can still save hundreds of pounds by shopping around for a better deal on an annuity - the fixed yearly income you receive when you cash in your private pension.

A shorter life expectancy means you can earn more from your annuity because the money won't, in theory, have to be paid out for so long.

Check with different pro- viders: many will offer "enhanced annuities" for smokers.

Blow for borrowers

Borrowers with a standard variable-rate mortgage at Scottish Widows face higher repayments after last week's decision to raise its standard variable rate (SVR) from 6.09 to 6.19 per cent.

Lenders are usually quick to pass on rises to SVR borrowers when the Bank of England increases the base rate, but Scottish Widows' decision comes ahead of this Thursday's monthly rate-setting meeting. Although the base rate has stayed at 4.75 per cent for seven months, Scottish Widows has raised its cost of borrowing by 1.25 per cent in the same period. A company spokesman said the increase was part of a regular review, but it is bad news for borrowers.

David Hollingworth, from independent broker London & Country, said that while lenders often increase their rates by a wider margin than any increase in the base rate, Scottish Widows' move ahead of the Bank of England meeting is very unusual. "Borrowers paying the lender's SVR should take this decision as a prompt to switch to a more competitive deal such as a tracker," he said.

Melanie Bien, associate director at broker Savills Private Finance, says borrowers should look for a lender offering a guarantee on the SVR. "Then you will not be at the mercy of your lender changing the rate as and when it wants," she said.

Scottish Widows last raised its rate from 5.84 to 6.01 per cent in September last year following a base rate rise from 4.5 to 4.75 per cent in August.

Endowment mis-selling

HBOS, the banking group that includes the Halifax and Bank of Scotland, has set aside £130m in compensation for endowment mis-selling. The "fund" was announced last week as the group reported £4.6bn in pre-tax profits. A spokesman for HBOS said the money was a "one-off provision".

HBOS customers are among millions of endowment holders facing a sizeable shortfall - of an average of £5,500 - on the policies they were sold in the 1980s as a way of repaying their mortgage debt with a lump sum at the end of the 25-year term.

This is according to figures from endowment compensation specialist www.seeingred.co.uk, which show eight in 10 policyholders are currently facing shortfalls. The firm estimates that 60 per cent of these may have been mis-sold a policy.

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