DERISORY

DEALS

views on Christmas can usually be divided into two categories. At best it is a time when people celebrate love and compassion in a special way - a time for the family, especially the young children who succumb to a special type of magic.

The obverse is all too familiar. A nasty, overheated commercial spend fest which, for me, the American use of the word ''tacky'' says it all. Whoever thought of the singing Christmas tree, complete with bizarre blinking eyes peering out of the plastic branches? My personal nightmare includes: tawdry decorations in shop fronts, bizarre street lights and a cacophony of nasty jingles playing over loudspeakers. This list is, unfortunately, not exhaustive.

For me, having a good time is the reverse of this yuletide nightmare of expensive presents of little or no real value.

Baah humbug? Well there is quite a lot of humbug around in personal finance.

As the old year shuffles towards its commercial close, it seems appropriate to look at some Christmas clinkers, i.e. poor personal finance deals, which should be avoided at all costs in the new year.

Where better to start than the so-called savings account devised by the ''how do they sleep at night?'' product designers from otherwise perfectly respectable institutions? A special piece of cold plum duff goes to Abbey National for their scroogely 1% offered in their Instant Plus Account.

Another slice of chilled duff for Bank of Scotland's Savings Account which pays a miserly 1.25%. Both of these accounts have been formed recently.

Do yourself a festive favour and bail out of substandard accounts and into something which pays a respectable rate, such as the Clydesdale Bank's Savings Account which pays 6.75%. If you find that an elderly relative has got an account which pays a derisory rate, such as the TSB's notorious blue and red passbook-based savings account with their legendary 0.5% interest rate, then feel free to send a stiff letter to the management. If you complain effectively, threatening a cocktail of Watchdog and the Banking Ombudsman, it sometimes stimulates a more customer-friendly way of thinking on the part of the bank or building society.

National Savings' worst products could have been designed by Mr Scrooge's meaner younger brother. The National Savings ordinary account pays a paltry 2% on balances under #500 and for larger amounts the 3% interest rate makes this an account to avoid, even if the first #70 of interest is tax free.

Recently National Savings raised its rates in an effort to become more competitive. However, the General Extension Rate remained at an ungenerous 3.51%. This rate is paid to people who hold on to the Fixed Interest Savings Certificates beyond their term of five years. Not a good idea.

Mortgages also provide a rich vein of poor value for the customer for whom the effort of shopping around is just too ghastly to contemplate. Compare the standard variable rate of 8.5% with Direct Line's value-for-money deal at 7.59%. It is a vast market and variation between the best and the worst is substantial.

Does anyone need an endowment mortgage any more than a pet fish needs a bicycle as a Christmas present? No, according to Alan Steel, of Alan Steel Asset Management, the Linlithgow-based firm of Independent Financial Advisers.

''The main beneficiaries from endowment mortgages are the salesmen or the lending institutions. They made some sense when tax relief was given on the premiums, something which has long since been abolished. Now it makes far more sense to have a capital and interest mortgage which allows you the flexibility of paying off the mortgage when it is convenient.''

A sliver of lightly chilled duff must also go to lenders like the Halifax who do not credit mortgage payments as they are made. Interest is calculated on balances at the end of December only, unless the capital repayment is over #500.

Mr Steel is also scathing about investment bonds, especially with-profits bonds.

''Most people seeking advice on retirement are offered these bonds, despite them being less tax-efficient than personal equity plans. They are being particularly heavily promoted by people advising those who have been made redundant. Initial commission for these products can be double the industry norm and clients should take care,'' says Mr Steel.

''Personal pension plans with regular monthly premiums have heavy charges and is another deal probably best avoided. It is usually better to have repeating single-premium policies written to the earliest retirement date,'' advises Mr Steel.

Mr Steel is also more than sceptical about the sale of with-profits income drawdown plans paid for out of the proceeds of a maturing personal pension.

''This can be an utter disaster in terms of taxation and income security. It has been estimated that these contracts are suitable for only about one in fifteen of pensioners, yet they are being sold widely.''

Paul Bennett, independent financial adviser with accountants Deloitte & Touche, makes the point that many of the larger financial transactions which carry heavy charges to pay commission to intermediaries are poor value.

''It is a sad fact of life that those people who can least afford to pay high charges are those who will be paying them on a commission for something like a personal pension. For a personal pension costing around #200 a month the commission could be about half of the first year's premiums, about #1200. I would charge around #500 for an average case of that type, based on my time.''

For many products where a commission is charged, it can produce handsome dividends to pay the adviser on a time basis and have the commission rebated, although the effect of value added tax should be taken into account.