Personal finance: Money Q&A: - Safe homes that let you out

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Last year I sold a house which I built 10 years ago. I made a profit of pounds 74,000 and am now building another home. I will need to use my pounds 74,000 by the end of this year. How should I invest it in the meantime?


If you are seeking a home for your money for just 12 months, you should almost certainly be looking at deposit accounts rather than the stock market. A market investment may turn out to give the best returns, but the risks are too great.

The stock market has bounced back remarkably and quickly from its hefty falls of last summer, but there is always the possibility of further big declines this year. You could be severely out of pocket if you needed access to your money just after a slide in share prices, notwithstanding that they could rise again later.

Your best option is probably an instant access account or one of the postal accounts that offer nearly instant access - even if you have to accept a slightly lower rate in exchange for maximum flexibility. Alternatively, consider a notice account (one where you have to give notice of, say, 30, 60 or 90 days before you can withdraw cash). Only pick a notice account if the rate is higher. Bear in mind that you would have to pay an interest- rate penalty if you had to take your money out in a hurry, without giving the correct notice.

Many accounts have tiered interest rates. The higher your balance, the higher the interest. You have a substantial sum, so make sure you check out the best rates for the amount of money you have to deposit.

It is possible the best returns may come from fixed-term or bond accounts. Interest rates generally are falling, and getting into a fixed rate now (with at least some of your cash) could be a smart move. But you would have to be very certain you would not need the money before the end of the fixed term. There are usually very large early withdrawal penalties.

For a guide to the best savings rates, see the tables on the opposite page. For a complete list of what's available, you can get a free copy of the Moneyfacts bulletin by calling 01603 476747. This is a monthly update; for the latest rates check the daily papers.

Pension gap

I worked abroad for two years in the Sixties and I think this might affect my state pension when I retire. Is the effect likely to be large and is there any way I can buy back pension rights at this stage?


Your state pension could be made up of two main elements: the basic pension and the state- earnings related pension (Serps). You may also be entitled to a very small graduated state pension based on National Insurance contributions paid to employees prior to 1975.

The Serps pension is based on Class 1 NI paid by employees. You won't, therefore, have built up any entitlement to a Serps pension during periods of self-employment. And your full entitlement to Serps may be reduced if you were, or are now, in a "contracted out" employer's or personal pension scheme. The employer's or personal pension will replace all or part of Serps. The formula for working out Serps is complicated. In any case, it is not possible to top up NI contributions to increase Serps.

The basic pension, sometimes described slightly misleadingly as a flat- rate state pension, is currently worth about pounds 64 a week. You may not get the full flat rate if there are gaps in your NI record. To get the full pension you have to have paid a minimum level of NI for a minimum number of qualifying years representing at least 90 per cent of your working life. Your working life will vary depending on your date of birth and sex.

Some people (such as those claiming certain state benefits like unemployment assistance) are automatically credited with the minimum level of NI while claiming. Others (typically married women) can claim "home responsibilities protection" if they look after children or care for old or sick relatives. They don't get credits but, instead, the number of qualifying years to get the full basic pension is reduced.

Note, too, that some married women who chose to pay a reduced rate of NI won't have built up entitlement to a basic state pension.

There may be some scope for improving your basic state pension by paying voluntary Class 3 NI contributions, though you may be restricted to filling in gaps going back just six years.

People who have been to university and expatriates working abroad are among those who may want to consider voluntary payments.

In your case, a gap in your NI record of just two years in the 1960s may not in fact reduce your basic pension.

Take more advice on what (if anything) you can pay by way of voluntary contributions. Get form BR19 from a Benefits Agency office and send it off to the Department of Social Security's Retirement Pensions and Forecast Advice Service. The details are on the form.

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

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.