Take time before those Tessas roll you over

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The Independent Online
I TOLD you so: fixed-rate Tessa offers are on the up, as Your Money predicted last week. Tomorrow sees the launch of Norwich & Peterborough building society's (01733 391497) Tessa, paying 7.65 per cent fixed for five years. It is available to savers of any society with a maturing Tessa who have the full pounds 9,000 to roll over. Last week also saw the TSB raise its fixed-rate Tessa offer to 7.4 per cent.

In the case of the N&P, the 7.65 per cent offer was already available to existing savers. But generally, the increasing availability of these better offers reflects the recent jitters in the bond markets, which knocked on into stock markets. This meant a rise in the longer-term interest rates on which fixed-rate Tessa deals are based (and which confusingly can move in opposite directions to savings rates and the rates the Chancellor fiddles with).

It has also translated into better fixed-rate savings deals elsewhere. Basic rate taxpayers with pounds 3,000 can now get 6.75 per cent net of tax, fixed for five years, as our best savings rate table on page 15 shows. In the meantime, interest on variable-rate Tessas continues to be pared away along with savings rates.

N&P's 7.65 per cent takes fixed-rate Tessa offers back to January levels when banks and societies were falling over themselves to attract maturing Tessa money. Rates may even go a little higher - other societies and banks may leapfrog over the N&P, while political uncertainty could help fixed-rate Tessa offers up above 8 per cent over coming months. All of which underlines that anyone with a maturing Tessa can afford to wait before rolling over into a new Tessa. Savers have six months from maturity to decide if they want to roll over all the money they put into their first Tessa. What you should get hold of, however, is a maturity certificate, for hassle-free transfers.

LIFE insurers are a desperate bunch. If you fear going mad over your roast beef this Sunday, be reassured that Skandia Life promises you will be covered under the pre-senile dementia clause of its serious illness Lifetime Plan. Most other insurers, it claims, are more restrictive - just covering you for Alzheimer's disease, for example (NatWest claims to be another exception). To be covered by Skandia, however, you must have no visible signs of the condition, whatever that may mean.

PROFESSIONAL building society windfall hunter, Michael Hardern of Members for Conversion, tells me he has had more than 300 requests for his Carpetbagger's Guide, following the mention in these columns. The guide, which includes contact numbers for 40 societies with whom to open an account, is free except for postage: call 0171-255 1079. And despite two ostensibly anti- carpetbagger moves last week, speculators should not be put off the trail.

The Government published its long-awaited building societies' bill for consultation, claiming it wanted to help preserve building societies with a range of measures that might blunt the demutualisation bonanza. Building societies predictably whinged that they weren't enough. But there's a lot of talk to come before anything becomes law, and that will not be until at least next year.

Secondly, the Inland Revenue said most building society windfalls would - instead of being wholly tax-free bonanzas - fall into the capital gains tax net, with pay-outs on society mergers being subject to income tax. However most people can legitimately avoid paying CGT, and if merger pay-outs are to be income taxable then so be it. It could ensure more mergers are a simple staging post to a bigger demutualisation bonanza, or pressure merging societies to increase pay-outs to offset the tax losses.