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MONEY MATTERS: WHAT SHOULD I DO ABOUT RIGHTS ISSUE AT HBOS?
Find out how to look after your money with Money Matters
Wednesday July 9,2008
By Annie Shaw
Q I don’t understand the HBOS prospectus.
Can you tell me what my options are? How come the price I am supposed to pay for the rights is more than the current share price?
A Your options are: take up the rights; sell them; allow them to lapse, or “tail swallowing” (selling enough rights to buy others so you don’t need to put down any cash).
However, taking up the rights or selling them, in full or in part, depends on the rights price being below the market price of the shares.
The problem for shareholders now is that the price of the HBOS rights at 275p has, over recent days, stood above the price of the shares on the stock market. There is absolutely no point in paying for shares via the rights issue if you could buy them more cheaply in the market.
And indeed you should now be deciding not just whether you want more shares but if you want to hang on to the shares you already hold.
Richard Hunter of stockbrokers Hargreaves Lansdown says: “One way to look at the question of the rights issue is: if you had £1,000 to put into equities, would you spend it on HBOS shares? If the answer is no, then it might be time to reassess your holding fundamentally.
“If you want to stick with banking shares, perhaps pick another stock. Or look at another sector altogether.”
Q I pay monthly sums to an insurance company for a private pension scheme. I am a 40 per cent taxpayer and get 20 per cent tax relief credited to my pension plan. How do I reclaim the rest of the tax relief due?
AGeorge Bull, head of tax at Baker Tilly Tax and Advisory Services, says: “If you are employed you should be able to get an adjustment made to your tax coding.
If you are self-employed you will make an end-of-year tax return anyway, and the adjustment will be calculated within this.
“Otherwise, if you are employed and the adjustment is not made via your tax coding, you may need to make an end-of-year tax return to HM Revenue & Customs.”
Q We have a with-profits endow-ment policy with Winterthur (formerly Colonial Mutual) which is due to mature in 2014. We have been warned about a shortfall.
I’m unable to understand how we have been paying premiums of £86 per month but for the last four years we have had zero bonuses added, and the projected figure at maturity has not changed.
AAndy Gibson, partner at financial adviser HCF partnership, says: “With-profits funds are these days often reluctant to add bonuses each year, as these are guaranteed and it reduces the managers’ ability to invest the funds as they like.”
The fund could, however, still be growing, he says, and when your policy matures you could get a terminal bonus — a system the companies like because they can adjust terminal bonuses up or down as they see fit.
To see what your policy is really worth ask customer services for a “death benefit” calculation, which would include any terminal bonus.
You could also ask for a surrender value if you were thinking of cashing it in, or you could consider selling it but you would probably not get much for it.
The main thing to find out is how the underlying assets of the fund are invested.
If they are mainly in equities, then the investment is probably perfectly adequate and should be doing its job.
Q My wife and I have a Silver Savings account with Northern Rock. It contains more than the £35,000 threshold that is guaranteed if a bank or building society gets into financial difficulties. Should we spread our money around?
AIt is extremely unlikely that a bank in this country would get into trouble and be unable to repay your savings. As we saw with the recent crisis, the Government stepped in to protect savers’ deposits and Northern Rock is now one of the safest places in Britain to hold your money, as the Chancellor of the Exchequer has declared a 100 per cent guarantee on all its depositors’ funds.
Meanwhile, the Government is also considering raising the current £35,000 guarantee per person per bank (so £70,000 for joint accounts) that applies to savings with other banks and building societies to £50,000, although this measure is still only at the proposal stage.
Nervous savers outside Northern Rock may get the most peace of mind by dividing up their cash so they do not have more than the current £35,000 guarantee in any one bank or building society.
If you have a financial problem or query, we can help. Every week, Money Matters will answer your questions with help from website CashQuestions.com.
Please write to Money Matters, Daily Express, The Northern & Shell Building, 10 Lower Thames Street, London, EC3R 6EN or email money.matters@express.co.uk.
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