Fergus Muirhead answers your consumer questions
I'm Fergus Muirhead and I'm here to answer any questions you may have about any money or consumer issues.
I'll be dealing with a selection of your queries every other Wednesday on Scotland Live, on Reporting Scotland and here on the BBC Scotland news website.
Please drop me a line here at firstname.lastname@example.org with your questions.
You can also read more on money and consumer issues on my own blog.
Q. My dad is in a care home and will be there for the rest of his days. He is 88 years old and suffers from cancer. His bungalow is up for sale and he's looking to get around £50,000 for it. It's owned outright by him as mum died a few years ago and there is no mortgage to settle. He has £14,000 in Individual Savings Accounts (Isas) and about £5,000 in cash from which he pays his care home account. He needs to dig into his savings by £120 every week to pay his way as his pensions and outgoings don't match and this is the shortfall. What he would like to know is: where is the best place to put the £50,000 to work for him and should he use it for his monthly care home charges or take money from the Isas to pay for them? Bobby McGaffney
A. You don't say what rate of interest your dad is receiving, Bobby, or how much his pension income is every week, but it would seem to me it doesn't really matter where your dad takes the money from to pay the care home fees. What is more important is his money is invested effectively and tax efficiently so that he is eating into as little of it as possible on a weekly basis. If we assume he has a total of £70,000 and he needs £120 per week, or £6240 per annum to cover care home fees, then this is equivalent to a return of about 9%. This is not easy to achieve in today's markets without taking a substantial amount of risk with the capital, which could see a fall in value if markets move against your dad. So it looks as though he will have to use at least some of his money on an ongoing basis. If you are not happy with any risk being taken with your dad's cash, you need to find the highest interest-paying account and invest all of his money there, being mindful of the fact you will need access to at least some of this cash to pay ongoing fees. Without knowing the details of your dad's circumstances, I don't know how much tax benefit there is in having his Isas, and in fact I don't know what type they are, but it may make sense to add them to the mix since there may be higher rates of interest available for larger lump sums. Alternatively, it may be you are prepared to take a bit of a risk and mix cash with some fixed-interest or stock market investments that may give potential for higher returns, but with a bit of a downside if the market falls. If you do this, the income you need could be taken out of any such investment tax efficiently, but this would require you to take professional advice. I feel it would be worth it.
Q. We have a Ford Fiesta with comprehensive insurance. We paid £29 per month until renewal last November when it increased to £36. Recently we upgraded to a newer Fiesta, and when we told the insurers they said there would be an administration charge of £25 and the new rate for the "new" car would rise to £43. We checked another company, and their rate was £120 per year cheaper! When we went back to our existing insurers, we were shocked to be told that the cancellation fee would be £143 plus the administration fee. Is this normal practice? Of course we have to stay for the eight months remaining. Colin Baxter
A. I think this is one of these questions where the simple answer would be "read the small print", but that sounds terribly patronising. It's not meant to be! Most car insurers will have their policies set up in such a way that you have to pay for the time you have been covered, should you wish to cancel the policy. But by the time they add in administration charges and early cancellation charges and any other charges they can think of, it puts you off moving to the company that was cheaper.
Q. I called the Prudential (formerly Scottish Amicable) and Aviva (formerly Norwich Union) to ask what my options were if I stopped making the payments on my endowment policies. I pay Prudential £19.60 and this "with profits" endowment is due to expire in February 2013. I pay £30 towards another Prudential endowment policy, which will expire in 2015, and £27.18 towards an Aviva endowment policy, which will expire at roughly the same time. That is a total of £76.78 per month that could be going to reduce the balance of my mortgage each month. I do not believe it would be best to cash them in, but I am wondering if the money I spend on them will be better spent if I paid it towards the mortgage to reduce the balance. Will I lose the life cover on the policy if I stop the payments without surrendering them? Fiona Henzie
A. You should be able to look at the "surrender value" of all of your policies and compare these figures to the final values that are being "projected". You then need to look at whether any of these figures are actually "guaranteed" or whether they are at best a guess. That will tell you whether it is in your interest to surrender the policies now or keep them until they are due to mature. You say you don't believe it is best to cash them in now, but it would be worth carrying out this exercise so you will know for sure. You rightly make the point that an alternative would be to make the polices "paid up", in which case you would not make any further payments - but you would have saved the £77 or so per month that could then be used to repay your mortgage more quickly. The downside of this is that you may lose some of the life assurance that is attached to these endowments. But depending on your age, state of health and amounts covered, you may be able to pick up some term assurance cheaply to replace this cover.