Your money: Readers' lives

Halifax handout ... Northern Rock's conversion ... personal equity plans. Your everyday financial queries answered
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I write as a member of the Halifax building society of several years standing whose balance at 25 November 1994 was under pounds 100 (briefly and for the first time since opening the account) though it subsequently returned to a level above pounds 100 before 31 December 1994. I find it very unfair that I should be excluded from both the so-called free share distribution and the statutory cash bonus because I am entitled to vote on the resolution for the Halifax to become a bank. DR, Leeds

The rules on who qualifies for free shares may seem arbitrary but they cannot be changed. You will not get any free shares because you did not have at least pounds 100 in your account on one of the relevant dates - in this case 25 November 1994.

However, you can still qualify for a statutory cash bonus. This goes to non-members of the society. In order to become a non-member and lose your voting rights for the special general meeting next (likely to be held in February) you must have less than pounds 100 in your accounts on 31 December 1996.

The statutory cash bonus will be a percentage of your balance on that date. It is expected to be worth between 5 and 10 per cent of the 31 December balance. So if you have pounds 99 and the bonus is 10 per cent you would get pounds 9.90. It is not a very great sum on a small balance, but it is better than nothing. So you may want to withdraw some money before 31 December and redeposit it in January.

Minors under the age of 18 cannot be voting members however much money they have in their accounts. But they are entitled to the statutory cash bonus. The bonus will be based on their balance on 31 December, so they may want to top up their accounts on that date. Bonuses will be restricted to a percentage of the balance of up to pounds 1,000 more than the balance on 25 November 1994. So minors who had pounds 1,000 in November 1994 could put another pounds 1,000 into their account on 31 December and the bonus will be paid on a balance of pounds 2,000.

I currently have money invested in Northern Rock Building society in an account which will entitle me to free shares when the society becomes a bank. The account is in my name and I pay tax at the basic rate but my wife has no income. Should I change the account to my wife's name or can I give the shares to my wife when they are offered?

BH, Durham

If your wife is a non taxpayer it would generally make sense to have building society accounts and other investments in her name. However, changing the account to her name now could be a mistake because you would lose the right to free shares and she will already have missed the qualifying date in her own right.

Northern Rock expects to become a bank next October. Consider changing the account to your wife's name after the conversion. Then she will be able to get gross interest without tax deducted. You will also be able to give her the free shares then, so that she will be able to reclaim tax on the dividends on the shares.

PS. Make sure that you have topped up your account to at least pounds 100 on 31 December 1996.

My wife and I are thinking of investing up to pounds 12,000 in personal equity plans but we are unsure about which bank, building society or other financial institution offers the best deal. Is there any way to find out? Or would it be better to pay off some of our mortgage rather than invest the money?

VT, London

Your choice of PEP will depend on a number of factors including whether you are investing for income or growth, whether you want to invest in higher risk or lower risk investments, whether you want to invest directly in shares or unit trusts and so on.

A good starting point is the annual guide from Chase de Vere, which lists all PEP managers and their basic details including the charges you might pay. It also carries a supplement that gives some figures on investment performance.

The next edition is due out in the New Year. The guide costs pounds 12.95 but if you order the new edition by 14 January 1997 you will pay pounds 7.95 (and the price is refunded if you buy your PEP through Chase de Vere). Ring 0800 526092 for details.

The alternative of paying off your mortgage has to be taken seriously. You will need to come to a view on whether this is likely to give you a better return on your money. If you are paying a mortgage rate of 7 per cent you will need to get a tax-free return of more than 7 per cent to make investing your money worthwhile.

Mortgage tax relief reduces the cost of the first pounds 30,000 of a mortgage by 15 per cent. Reducing a 7 per cent mortgage rate by 15 per cent brings the rate down to 5.95 per cent on the first pounds 30,000 of a loan. In this case you will want a tax-free return of over 5.95 per cent in order to make investing your money the better course.

You could consider paying off some of your mortgage and then investing the money you save each month in a regular savings PEP plan to build up your capital again.

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

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

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