Hit by fees as the home loan ends

MONEY Q&A
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The Independent Online
I am finishing one mortgage with my building society and taking out another. They are charging me a vacating fee of pounds 115 and a deeds production fee of pounds 40. I object to both. Can you give me the address of the ombudsman scheme?

BR, SUFFOLK

These end-of-mortgage fees are a common source of surprise and irritation. In most cases there is something in the small print of the documents you signed when you took out the mortgage requiring you to make these payments. But lenders do make mistakes and you should check the paperwork if you still have it, or ask the lender to send you copies.

Before taking your case to the ombudsman you must complain to the lender and wait for its final decision.

It is a good idea to register an objection with the ombudsman even if it finds in favour of the lender. If the office receives lots of similar complaints, this may bring some pressure on lenders to change their ways. After all, when you pay your mortgage interest, you expect this to cover all the lender's costs, margins and profits. It seems hard to defend specific fees for specific items of administration which should form part of any mortgage. (Whether there is a case for charging for admin which is not inevitable, such as letters saying you are in arrears, is another matter.)

Your lender is a building society and complaints should be sent to the Office of the Building Society Ombudsman, Millbank Tower, Millbank, London SW1P 4XS. Telephone 0171- 931 0044. Banks are covered by the Banking Ombudsman, 0171-404 9944. The building society scheme is compulsory but some small lenders may not be members of the banking ombudsman scheme.

Pension puzzle

My pension administrator at work has turned down my request to make additional voluntary contributions to the pension scheme on the grounds that my pension will already be big enough. She cites legal rules. Is that possible? It seems a bit harsh and contrary to the intention of governments which want us to make private provision.

WT, ESSEX

Go through the figures with your administrator to make sure she has done the maths correctly. Assuming she has, you won't be able to pay additional voluntary contributions (AVCs). This is because the rules put a cap on any pension from an employer's scheme. As with anything to do with pensions, the rules are complicated. Basically, you can't get employers' pensions of more than two-thirds of your before-tax pay prior to retirement. The rule is intended to stop the tax advantages of pension schemes being abused by, say, company directors. There is also a cash cap, two-thirds of pounds 87,600 in the current tax year, which applies to some employees, depending on when they joined the scheme. You can get increases in the maximum pension after retirement in line with inflation.

In practice, few employees get anywhere near the maximum because of job changes or late enrolment in a scheme. Unfortunately, too many people have a vague notion they will receive a two-thirds pension, so what they get at retirement comes as a shock. These are the people who should be looking into the pros and cons of AVCs.

The taxman expects

I have a small, part-time business. I have been assessed to pay tax of pounds 2,000 in January based on what I earned in the 12 months to 5 April 1997. However, my earnings in the current year will be lower than last year.

AR, LONDON

Your tax bill for 31 January 1999 will consist of two elements. First, there may be a final payment for the 1997/8 tax year, if your two payments on account for 1997/8 (due on 31 January and 31 July 1998) were not enough to meet your tax liability. Second, you will have to make the first payment on account for the 1998-99 tax year, based on half your liability for 1997-98.

You do not have to make the full payment on account if you expect your liability for the current year to be lower than last year. Bear in mind that the current tax year has nearly five months to run, so you may have to guess your final earnings.

If you intend to reduce your payment on account, write to your tax office and give your reason; you do not need to wait for approval. But if it turns out your payment should have been higher, you will be charged interest from 31 January on the difference. For example, if you were asked to pay pounds 2,000, chose to pay pounds 1,000 and your final liability turns out to be pounds 1,500, you will incur interest on the pounds 500. You can pay the extra at any time.

Write to the personal finance editor, Independent on Sunday, 1 Canada Square, Canary Wharf, London E14 5DL, and include a phone number; or fax 0171-293 2096; or e-mail i.berwick@independent.co.uk

Do not enclose SAEs or any documents you wish to be returned. We cannot give personal replies, nor can we guarantee to answer letters. We accept no legal responsibility for advice given.

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