Q: I have a Prudential with profit bond. On the BBC it was stated that on the tenth anniversary of a bond, investors could withdraw their money with no Market Value Reduction. Is this true? R.E.D.
A:Market Value Reductions are back in the news again after the recent stock market slide. MVRs allow life companies to snatch back some of the value of your investment if you encash it. This can cost you up to 25 per cent of your money! Some companies did market bonds with a tenth anniversary escape clause that sidesteps any MVR, but these were mostly sold before the year 2000. I have not seen such a clause in a Prudential policy, but the Pru has its own rule that lets many investors withdraw up to pounds 25,000 with no MVR, if their bond is over five years old. Check your bond's small print to see if you can take advantage of this.
Q: An elderly neighbour has received a letter from Fifth Avenue Precious Jewellery. When she read it, she thought she had won pounds 8,700. I persuaded her to let me contact you. The letter refers to a 'certified cheque'. What is this?
A:A certified cheque is one that should never bounce, because the bank has confirmed that cash in the issuer's account will meet it. The letter your neighbour received is just a bid to tempt her into ordering cheap jewellery.
Confusing wording does say she is a winner, and it does say there is a prize of pounds 8,700 payable by certified cheque. But it does not actually say that she has won this. Very small print reveals that Fifth Avenue is a name used by a Luxembourg company called Euro Shopping, which is offering a free entry in a draw. There is one prize of pounds 8,700. Everyone else gets a pounds 2 voucher towards cheap jewellery!
Q: I read your recent article about national insurance and rang the contributions office in Newcastle about a refund. They laughed! Not only can I not get a refund, but I need to pay 44 years of contributions in all. A.F.
A:There are two differences between you and the reader who raised the subject a few weeks ago.
First of all, she is a woman and you are a man, and women need pay fewer contributions than men towards their pension. But the big difference is that she was enquiring about voluntary contributions. From 2010 she will need fewer contributions to earn a pension so could stop paying. My guess is that you are employed, in which case you have no choice but to pay. Just regard it as extra income tax, which is what it really is.
Q: How should I invest pounds 5,000 I have inherited? I am not sure which bank is best, and I have no idea about shares. A.F.
A:Avoid shares unless you are happy to take risks, which could be costly risks right now! If you are a taxpayer, consider a tax-free Isa from Barclays, currently yielding 6.08 per cent gross interest, with instant access to withdrawals if needed.