Questions of Cash: Liquid Gold savings account

Q: I had a Liquid Gold savings account with Leeds Permanent Building Society for many years, which was transferred to the Halifax when they merged. I checked my statement and found interest paid had fallen to just 0.73 per cent gross, and now I find it has since fallen to 0.5 per cent.

This means I have lost £90 interest compared with that payable in other accounts. I was never informed my interest rate had been cut: I was only advised to transfer money into an Isa account, which was irrelevant because I had fully used my ISA allocation. MC, Twickenham.

A: Many people are unhappy with Halifax's treatment of the Liquid Gold accounts, repositioned as low-interest accounts for people who want to use passbooks rather than ATMs. They now pay 0.1 per cent.

Halifax says it has fully complied with the Banking Code by writing to you in May 2002 listing the rates paid in all its savings accounts and offering you a personal savings review, which you did not take up.

The Banking Code Standards Board says Halifax did comply with the code, but this was amended from March this year to deal with exactly this problem.

Now, any bank which downgrades interest paid on an account by more than .5 per cent in a year, as Halifax did with Liquid Gold, must write a personalised letter to all customers affected to advise them and permit them to withdraw funds immediately without penalty.

Q: My mother is 81, widowed and on full income support. She owns her house, which is worth £120,000, with other assets of £4,000. She has three sons including me, and wants us to inherit the value of the house. She is worried that if she goes into a care home she will be forced to sell the house to pay for the care and may leave nothing to her family. What are her options? RA, Bexleyheath.

A: Philip Spiers, of the specialist adviser the Nursing Homes Fees Agency, says that if your mother gifts the house to you and your brothers now she could be refused financial assistance from the local authority for her care costs.

"For the first 12 weeks of care the local authority would assist with the care costs; beyond that, they would reclaim any financial help from the property's eventual [or past] sale proceeds," he says.

There is no restriction on how far back the local authority can go to reclaim the proceeds and if the sale is within six months of your mother going into a home you and your brothers would have to pay her care costs. Mr Spiers suggests she take advice on financial plans for care costs.

Q: When I got a mortgage with Lloyds Bank in 1987 I was compelled to take out an endowment. With two years to go, it is showing a potential shortfall of £6,900. Am I entitled to redress for mis-selling? RWS, Cornwall.

A: Lloyds TSB tells us Lloyds Bank was selling repayment and other types of mortgages, as well as endowments, in 1987. The Financial Ombudsman Service says it is unaware of any mainstream lender which sold only endowment-backed mortgages. If you are saying a Lloyds' sales representative offered you only this, that would appear to be mis-selling. You should complain first to Lloyds TSB and if you are not satisfied with its response you can request the Financial Ombudsman (020 7964 1000) to review the case.

Q: Further to other questions about the deposit protection scheme (Questions of Cash, 8, 22 and 29 March), you say that if a bank became insolvent and a mortgage borrower also had a separate savings account, then these would not be set off against each other to calculate the net debt.

I think you are wrong. Surely under the Insolvency Rules these must be set off against each other? HT, London.

A: We were misinformed and you are absolutely correct. Thank you and our apologies. In the unlikely event of a mortgage lender going into liquidation, the deposit in a savings account would be deducted from the debt owed to the bank through a mortgage to produce a single net figure which the borrower owed to the bank. This would be the same whatever type of savings account you held.

Q: The managers of Peps and Isas can recover the 10 per cent tax credit on share dividends for investors. From 6 April, 2004, they can no longer do this. What happens with corporate bonds? At present, managers can recover the 20 per cent tax deducted from the interest payments. Does this continue? LW, by e-mail.

A: The treatment of corporate bonds remains unchanged. Mark Dampier, head of research at advisers Hargreaves Lansdown, says: "On the face of it, this seems to make corporate bonds much more advantageous in terms of income."