Your Money: Readers Lives

Savings accounts ... buildings insurance ... the widow's allowance. Your everyday financial queries answered

I have some savings with Nottingham building society. Until last January they were in the society's Post Direct account. Then I discovered its Post Mark account was paying a better rate of interest and switched to that. Recently I found out that its Direct Reserve account was even better and switched again. All that seems to happen when I switch accounts to restore a proper interest rate is that a new sticker is put on my savings book. Isn't the society simply relying on the inertia of often elderly investors to cheat them of their expected interest rates?

DP, Surrey

It's a common complaint, but you may be being little unfair in this case. The simple advice for all savers is to keep up to date with the rate of interest their money is earning - and see how it compares with other accounts. A justifiable charge against many societies is that they launch competitive accounts to attract new savers while paring away the interest on older accounts that are no longer marketed. In the industry these old accounts are referred to as closed or obsolete.

The Nottingham, however, denies it plays this game. It says it has accounts that may be temporarily not available but they are not obsolete. The society opens accounts, closes them when it has pulled in enough money, then reopens them when it wants more money. This practice is adopted by some other societies.

The three accounts you have had do indeed pay different rates. Post Direct pays 3.95 per cent gross, Post Mark 5 per cent and Direct Reserve 6.1 per cent on balances of pounds 2,500. Importantly, though, the first is an instant access account; the second requires seven days' notice of withdrawals and the third requires 20 days.

As a general rule, the more notice you have to give for withdrawals, the higher the rate of interest. And all three postal accounts pay more than their branch-based equivalents. Accounts run by post have lower admin costs and they invariably dominate best buy tables.

In fact Direct Reserve is a brand new account launched in September. You became aware of it fairly soon after launch and switched into it. But it is not always easy to keep abreast of the current top rates. A number of societies, including Nottingham, run interest rate hotlines. Do get into the habit of using them on a regular basis, and compare rates with what you see in the Independent on Sunday's own table of Best Savings Rates (see right).

In the past I usually paid my buildings insurance premium as the renewal notice arrived. This year, I decided to get some other quotes. Norwich Union (via the AA) gave pounds 116, Sun Alliance quoted pounds 269 but Saga quoted pounds 335. Saga is supposed to offer good deals for the over-50s. It tells me it is competitive and secure. But is it exploiting people who maybe do not shop around?

RT, Surrey

Saga says it is competitive and cites house contents insurance (not the same as buildings) as an example. The average premium paid by its customers is pounds 70, compared with a market average of pounds 110. But it acknowledges that it won't be cheapest for everyone. Insurers set their premiums according to their own claims experience in different postcodes. They would always advise people to shop around.

Many insurers offer "special" deals - to those in certain occupations, those who have fitted extra security, those over a certain age and so on. But don't assume that you're getting the best deal on the market just because you fall into a particular category.

In fact, there has rarely been a better time to shop around for buildings insurance. Insurance goes in cycles. There are currently too many insurers chasing the same business. This is helping to keep premiums down, so it is a buyers' market.

But beware of buying on price alone. Find out, for example, exactly what cover you get for fences and garden walls, a garden shed or even a swimming pool (assuming you have one). Check the excesses that you have to pay on any claim. Find out what alternative accommodation cover you get. This pays out if you can't live in your own home because of, for example, a fire. And make sure you are insuring for the correct figure -what it would cost to rebuild your home from scratch. The Association of British Insurers (0171 600 3333) publishes a free leaflet on how to work this out.

Arguably those most at risk of paying over the odds for buildings insurance are home owners who automatically buy the policy offered by their mortgage lender without shopping round.

My husband died in September 1993. Shouldn't I be entitled to an extra tax allowance of pounds 1,790?

AW, Manchester

You may well be entitled to what's called the widow's bereavement allowance in both the 1993-4 and 1994-5 tax years. The allowance runs for two tax years unless you get married again during that time. Benefiting from the allowance also assumes you had enough taxable income to make use of it during those tax years.

Put in a claim to your tax office, as claims can be backdated by up to six years. If you're not sure which tax office deals with your affairs, contact any Tax Enquiry Centre listed under Inland Revenue in the phone book.

The allowance was worth pounds 1,720 in 1993-4 and the tax saving depended on your top rate of tax. It was worth pounds 430 to a basic-rate taxpayer. In 1994-5 the tax saving was restricted to 20p in the pound for everyone, making it worth pounds 344.

q 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 documents that you wish to be returned. We cannot give personal replies and cannot guarantee to answer every letter. We accept no legal responsibility for advice.

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