Money Q&A: Don't panic, travellers: the Eurocheque is here to stay

Lloyds Bank has announced it is cancelling its Eurocheque service at the end of this year. Eurocheques have got me out of trouble many times and I consider the service indispensable. I could open an account with a German bank to get Eurocheques but I don't have the money. What can I do to ensure that I have Eurocheques in 2000 and after?

DB, Kent

For the uninitiated, Eurocheques are an alternative to the traveller's cheque. Like normal cheques, Eurocheques are linked directly to your main current account and can be backed by a guarantee card.

Eurocheques are accepted widely in Europe and beyond (for example in Israel and some north African countries). Indeed, they may be more easily recognised and accepted abroad than traveller's cheques. Some UK tourists report their traveller's cheques have occasionally been rejected because they carry the name of an unfamiliar bank. Eurocheques are useful in places where plastic cards have yet to catch on, such as rural France or remote Greek Islands. As in the UK, many small traders do not accept plastic because of the extra costs involved, especially the start-up costs.

The use of all cheques is steadily declining as plastic cards take over but cheques are likely to be around for some time yet.

The volumes of Eurocheques (and banks' willingness to issue them) might increase if more people were aware of their existence. The customer normally has to pay extra costs and commission on Eurocheques, but you also have to pay for traveller's cheques - and then decide how many you want before a trip and pay for them in advance.

Lloyds' decision to pull out of Eurocheques has not been followed by other banks. In 2000 you could consider opening an account with another UK bank to get your cheques.

Windfall tax

I am now a reluctant shareholder, having received windfall shares from two former building societies. Do I have to declare these to the Inland Revenue ? I don't get a tax return.

WF, Dorset.

Like interest on bank and building society accounts, share dividends have the equivalent of basic rate tax deducted at source. So you only have to declare these dividends if you are a higher-rate taxpayer (in which case you would probably get a tax return anyway) or if the gross value of these dividends (net dividend plus tax credit) pushes you into the higher tax band.

You must declare income if you owe tax on it. If you do need to declare this income you have six months from the end of the tax year to inform your tax inspector (until the 5 October 1999 for income arising between April 1998 and April 1999). If in doubt, contact your tax office anyway. If you don't know where your tax office is, speak to your payroll office (if you are employed). Otherwise phone the local office listed in the phone book.

Best investment

I have some money in a PEP but am aware that PEPs are coming to an end in April. I am trying to decide whether to put more of the money I have in my PEP or to start paying pounds 25 a month into a 10-year tax-exempt savings plan with a friendly society. Do you have any advice ?

AO, Kent

All assets held in PEPs on 5 April will continue to benefit from tax- free income and growth, hence a frenzy to beat the deadline. However, investing money purely for tax reasons is a bad idea. Now could be precisely the wrong time to put a lump sum into a share-based PEP investment since share values are high at the moment. This could be a more favourable time to invest in corporate-bond PEPs. But don't rush a decision.

In any case, you say you don't have vast sums to invest. The new ISA (individual savings account) limits may be ample for your needs. You'll be able to invest pounds 7,000 in the first year, pounds 5,000 a year thereafter. ISAs replace PEPs on 6 April and will perform the same tax-sheltering functions as PEPs. If you really want to invest regular monthly savings rather than a lump sum, you will be able to do this in an ISA from April.

Plans from so-called friendly societies (and Liverpool Victoria friendly society has just been fined a record pounds 900,000 by the investment regulators) can give poor returns. They have a somewhat anomalous tax status but "tax exempt" is a great tag to sell to investors. However high charges on low premiums can soon gobble up any tax advantage. Long-term friendly society plans, like long term savings plans from life insurance companies, are inflexible. You can lose out badly if you want to stop paying premiums or cash in the policy early.

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, nor can we guarantee to answer letters. We accept no legal responsibility for advice given.