Your Money: Three... two... one... Go!

Before hot summer days overwhelm them, savers should act on a trio of important deadlines, writes
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The Independent Online
Thousands of savers with tax-free Tessa accounts that have matured could boost their interest by as much as pounds 30 or more a month by catching a looming deadline.

Around 100,000 savers with tax-free Tessa accounts that matured in January have yet to reinvest in a new Tessa, estimates Birmingham Midshires building society. Many are earning much less interest than they could from a Tessa.

Savers have six months from the date their first account matures to rollover up to pounds 9,000 of the money they put into their first Tessa into a new one. After this deadline savers are limited to a first-year investment of pounds 3,000.

Some of the people who have yet to open a new Tessa will have already spent the money or invested it elsewhere, and so will not have the readies to take advantage of the concession. But many others are unnecessarily losing out.

When a Tessa matures the money is not paid out, but stays with the bank or building society until you tell them what to do with it. The money earns interest, but this interest is taxable. And, even ignoring the tax, the rates paid are often much less than those on Tessas. The Halifax is among the best, paying 5.65 per cent before tax, but others are closer to the Nationwide - 2.8 to 4.2 per cent - or even the Yorkshire building society's 2.35 per cent.

Whether or not you take advantage of the six-month concession, you do not have to reinvest with your existing Tessa provider. The savings table on page 19 shows some of the best Tessa deals available. You should also ask your existing Tessa provider if it is offering a special deal for existing customers. If you want to reinvest more than pounds 3,000 with a different bank or society, you will need a maturity certificate from your previous Tessa provider.

Fixed-rate Tessa deals are offering up to 7.5 per cent; those where interest will rise and fall along with other savings rates are paying a little less.

One way of boosting returns may be to plump for a society that could be taken over or that may convert into a bank over the next five years (the lifetime of a Tessa).

For example, Birmingham Midshires building society is offering a variable- rate Tessa paying 7.25 per cent and guaranteeing that the rate will stay at least 3 per cent above inflation.

With fixed-rate Tessas, a number of societies - including the Bradford & Bingley - will give 7.4 per cent: slightly less than the 7.5 per cent available from some banks - but any windfall from conversion should more than make up for this difference.

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