Readers' Lives

Free shares ... savings after redundancy ... giving money away. Each week we answer your letters on everyday financial concerns
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I have pounds 70,000 in a Halifax Solid Gold savings account and have been waiting for my free shares. But it is taking so long and I would like to withdraw pounds 50,000 to buy a house. Is this wise? CI, Hertfordshire

The rules are complicated, but it is worth getting on top of them to make sure you don't lose out.

To be eligible for the basic distribution of free shares, savers must have had a total balance of at least pounds 100 in qualifying accounts on 25 November, 1994. They must also have at least pounds 100 with the society on a date yet to be announced, but expected to be 31 December, 1996. In addition, they must keep a qualifying account open until the actual date of the conversion, expected to be in June, 1997.

The value of the basic distribution is not known, but commentators have put its value at between pounds 500 and pounds 900.

In addition, there will be an extra payout for savers with balances of at least pounds 1,000 on both 25 November, 1994 and on the date of a special general meeting, expected to be late February, 1997. The number of extra shares you'll get on top of the basic distribution depends on the lower of your balances on 25 November, 1994 and the date of the February meeting.

Balances over pounds 50,000 won't increase the number of free shares you get, so you can withdraw money as long as the balance stays above pounds 50,000. But at pounds 50,000 and under, you have to be more careful. You can make withdrawals now, but you will need to top up your balances by February next year to at least the level they were on on 25 November, 1994 in order to maximise your entitlement.

Unfortunately, the Halifax has not yet revealed the split between the basic and variable distribution, so it is difficult to know whether it is worth hanging on, but it probably is.

After the special general meeting next February, any withdrawals won't affect your entitlement, as long as you remain a member until the conversion in June. In theory, you could then run your balances down to pounds 1, although the Halifax recommends you keep at least pounds 100 in until the actual conversion.

The Halifax has just published a booklet, The Next Steps To Conversion, which aims to answer customers' questions on the process and its timing. It's available free from branches.

Following a redundancy, what should you do with a long-term insurance- based savings plan?

CP, Nottingham

You must look for ways to cut your regular outgoings. But you do need to tread carefully before stopping payments on a long-term insurance-based savings plan. If it is linked to a mortgage, consult your lender about converting to a repayment loan, but check what net savings you will make, if any.

You could make the policy "paid up". This means that you pay no more premiums but keep the money invested until the normal maturity date. This is probably the best thing to do if you do not need the cash immediately.

If you cash it in, you will be penalised. In fact, if the policy was taken out quite recently, it may have little cash-in value. If you need the cash now, a better option would be to sell the policy in the second- hand market. Providing your policy has a second-hand value (and there is only really a market for established endowment policies), the person buying it takes on responsibility for paying the premiums.

They get the final payout on maturity, or the life insurance value if higher than the cash-in value, should you die before the maturity date.

Second-hand values can be from 10 per cent to 30 per cent higher than cash-in values. But bear in mind that the buyer expects to get a decent return and the intermediary arranging the sale quite reasonably makes money out of the sale. So, while better than cashing in, selling on your policy still means that you don't get full value from your premiums.

The second-hand market concentrates on with-profits endowment policies which are at least five years old. Many of the businesses in this field belong to a trade body called the Association of Policy Market Makers. For a list of members, write to APMM at Holywell Centre, 1 Phipp Street, London EC2A 4PS (0171-739 3949).

I believe I can give away pounds 3,000 each tax year without incurring an inheritance tax bill. Is that so? RN, Mid-Glamorgan

Yes. The first pounds 3,000 of gifts you make each tax year will escape inheritance tax when you die. But some gifts are quite separately not subject to inheritance tax anyway.

For example, you can give any number of people gifts totalling no more than pounds 250 in value to each person, each year. Wedding gifts are also tax- free, up to pounds 1,000 (or pounds 5,000 for gifts from a couple's parents).

There are other concessions to bear in mind. There is no tax to pay even on taxable gifts, as long as the giver lives for at least seven years after making the gift. Also, the first pounds 200,000 of your estate is free of inheritance tax, so gifts made within seven years of your death that do not take you over this overall limit are also tax-free.

Note, however, that this "nil-rate" band could change.

q Write to Steve Lodge, personal finance editor, Readers' Lives, Independent on Sunday, 1 Canada Square, Canary Wharf, London E14 5DL, and include a telephone number.

Do not enclose SAEs or documents that you wish to be returned. We cannot give personal replies and cannot guarantee to answer every letter sent to Readers' Lives. We accept no legal responsibility for advice.