Money Q&A: Personal finance: For sale: one immature endowment policy

I TOOK out an endowment policy 15 years ago to pay off an interest- only mortgage. Five years ago, I married and my husband and I then bought a place together with a repayment mortgage, chosen because of the possible maturity shortfalls of endowment mortgages. I read that to get the best return, I should keep my existing endowment going until its maturity date. Now I need cash and want to sell it in the second-hand market. How do I go about this and how can I be sure of getting the best price?

LS, HERTFORDSHIRE

You are right to think that it is generally the best policy to keep an endowment policy going if you can to maximise the return on premiums already paid. Early surrender payouts are usually poor.

Selling a policy in the "Shep" (second-hand endowment policy) market - also known as the "Tep" (traded endowment policy) market - can often produce 10 per cent more money, or in exceptional cases 30-35 per cent more.

However, even this second-hand value is likely to be less than the true underlying value. The buyer who invests in the policy expects a good, low-risk return, and the firm selling the policy must make a living out of buying and selling policies.

With-profits endowments or whole-of-life policies may have a second-hand value. A with-profits policy must normally have been running for at least five years, and at least one-third of its term. Even then, the policies of some insurance companies will not have a second-hand value. This may be because the surrender value is already relatively good.

You have nothing to lose by finding out whether a policy does have a second-hand value; a quote costs nothing.

Get a list of firms in this business from the Association of Policy Market Makers (APMM) at The Holywell Centre, 1 Phipp Street, London EC2 4PS (0171-739 3949). The APMM provides a form to fill in to enable it to distribute your policy details to three member firms, who will then each give you a quote.

Alternatively, try the rival Association of Policy Traders (APT) at Skipton Chambers, 12 Market Street, Bury, Lancashire BL9 0AJ (0161-736 1919). The APT refers you to independent "trawling" companies, two of whom are APT members. They circulate details of your policy to all the market-making firms - those that actually buy and sell policies - including all APT members and all APMM members. This should mean you get the best price, but you will have to pay an extra fee for the services of the trawler firm.

An alternative to using a market-making firm is to sell at auction. Contact HE Foster & Cranfield at 20 Britton Street, London EC1M 5TY (0171- 608 1941).

An auction may give you the best price, but obviously you cannot be sure until the policy is actually sold. And an auction may not suit you if you are in a hurry for money.

By contrast, if you use a trawler firm, set out your timescale and the company will concentrate on the fastest-paying firms (which may not be the best payers). You may be able to get the money within a few days instead of several weeks.

Annuity without tax

My wife and I are retired. Her income is less than her tax allowance and she counts as a non-taxpayer. We have about pounds 30,000 in a building society account in her name so that she can get the interest without tax deducted. She also has a small annuity in her own right. Can she register to have the annuity paid without tax deducted in the same way as the building society interest?

MA, WILTSHIRE

If your wife has a pension annuity (one she was obliged to buy with the proceeds of a pension plan or scheme) the whole payout is potentially taxable. If, however, it is a purchased life annuity (one bought voluntarily) it is automatically paid in part without tax deducted.

The tax-free element depends on how old your wife was when she purchased the annuity and the type of annuity - whether it is a flat rate or increasing annuity. In theory, it is the return of your wife's own capital rather than income. That is why it is tax free.

To stop having tax deducted on the taxable part of an annuity, your wife must complete form R89, which the insurance company paying the annuity can provide. She can also claim back tax already deducted.

Your wife can reclaim tax deducted over the six years before the current tax year if relevant (that is, if she was a non-taxpayer). This means she can go back to 6 April 1992 as long as she submits her claim by the end of the current tax year, 5 April 1999.

Claims for a tax rebate will have to be dealt with by your wife's tax office. If she is not sure which tax office deals with her affairs, she can get advice from a Tax Enquiry Centre (which will be listed under Inland Revenue in the telephone directory).

Too much chat

Our 15-year-old son and his friends have been having great fun ringing up very expensive chat lines. Is there an organisation that deals with complaints about these lines?

AP, SURREY

You want to contact the premium rate telephone line watchdog, Icstis, at Freepost, WC5468, London WC1V 7BR (0800 500212).

Icstis stands for the Independent Committee for the Supervision of Standards of Telephone Information Services and is funded by the industry itself.

Write to the personal finance editor, 'Independent on Sunday', 1 Canada Square, Canary Wharf, London E14 5DL and include a phone number, or fax 0171 293 2096, or e-mail i.berwick@independent.co.uk. Do not enclose SAEs or any documents you wish to be returned. We cannot give personal replies or guarantee to answer letters. We accept no legal responsibility for advice given.