Post office account, cheques in hand and other investments

Part 5 Post office account, cheques in hand and other investments

October 2012 

31.5.84 Introduction

This part covers a number of different accounts and investments, as follows: 

Detail Paragraph no

Post office account

31.5.85

Cheques in hand

31.5.86 to 31.5.88

Savings account

31.5.89 to 31.5.91

Individual Savings Accounts (ISAs)

31.5.92

Building society mergers etc

31.5.93

National Savings and Investments (including premium bonds)

31.5.94 to 31.5.100

Paypal accounts

31.5.101 to 31.5.102

Government bonds or stocks

31.5.103 to 31.5.104

Friendly Societies

31.5.105 to 31.5.106

Unit trusts

31.5.107 to 31.5.108

Open Ended Investment Company (Oeic)

31.5.109 to 31.5.110

Personal Equity Plans (PEPs)

31.5.111 to 31.5.112

Investment trusts

31.5.113 to 31.5.114

Precious metals coins and bullion

31.5.115 to 31.5.116

 

31.5.85 Post office card account

(amended July 2013)

A post office card account is a post office account that can only be used to receive benefit, state pensions and tax credit payments. There is no overdraft facility on the account and no other deposits, such as wages, can be paid into it. The operation of the account is regularly put out to tender and, as at May 2012, is operated by J. P. Morgan Europe Limited. The official receiver may have an interest in the balance of a post office card account and should issue notice to the bank but not take the bank card from the bankrupt. The official receiver may realise the whole, part or none of the credit balance (see paragraphs 31.5.70 and 31.5.71).

 

31.5.86 Cheques in hand – identifying the payee

Cheques made payable to the company or bankrupt should be collected promptly. Care should be taken where companies with similar names occupy the same premises or where companies within a group have similar names. In a bankruptcy family members may have the same name or the same initials. Where there is any doubt about ownership of cheques the official receiver should ask for evidence.

 

31.5.87 Dealing with cheques in hand

Once the official receiver has established that the cheques are payable to the company or bankrupt he should issue a receipt to the company director(s) or bankrupt.  The cheques should be paid into the estate account without delay and not held pending the appointment of an insolvency practitioner as liquidator or trustee.

 

31.5.88 “Stale” cheques in hand

It is a convention that cheques are considered “stale” if they have not been presented for collection or cashed within six months of the date on which they were drawn. If a cheque is not met because it is “stale” the official receiver should ask the drawer to provide a replacement or to re-date the original cheque with the current date. If the official receiver’s request is refused and the drawer is a debtor of the company or bankrupt they should be pursued for payment in the same manner as any other debtor.

 

31.5.89 Savings accounts – initial procedure

The bank or building society where the account is held should be sent notice of the winding-up or bankruptcy order, as soon as possible after discovery of the account, to prevent any unauthorised removal of funds. Any passbooks and/or cards for the account should be recovered as soon as possible to prevent any unauthorised withdrawals. Recovery of the passbook would also prevent a bankrupt using the account as evidence of wealth to incur further debts.

 

31.5.90 Savings accounts – realisation or longer term investment

The official receiver, as trustee, can exercise discretion in getting in, realising and distributing the bankrupt’s estate [Note 1]. The official receiver as trustee may use this discretion to continue to hold longer term investments to maximise returns rather than realising them at the earliest opportunity. The official receiver may wish to consider consulting the creditors or making an application to the court for directions before doing so [Note 2]. If the official receiver causes a loss to the estate by holding on to longer term investments a creditor may make an application to court to reverse or modify any decision of the trustee [Note 3] or to seek payment from the trustee to rectify the loss [Note 4].

 

31.5.91 Long term savings accounts

Most banks and building societies offer savings accounts where a higher rate of interest is paid in return for restricted access to the funds. Such accounts usually have a notice period of 60, 90, 120 or more, days before monies can be withdrawn without incurring a penalty. The official receiver should give the required notice before closing the account rather than forfeit any interest due, unless the funds are considered to be in jeopardy. The official receiver should realise the balance on the account by sending a BANK 1 letter, amended to include the required notice period, to the bank or building society holding the account.

 

31.5.92 Individual Savings Account (ISAs)

ISAs replaced TESSAs (Tax-exempt special savings account) in April 1999. Any monies in a TESSA account were transferred into ISAs in April 2008. Tax is not deducted from the interest paid on an ISA account, nor is capital gains tax incurred if the value of the investments made rise over the investment period. An individual can save up to £11,280 as at 6 April 2012, with no more than £5,640 in a cash ISA and the balance in stocks and shares. An individual may decide to have 100% of their allocation in stocks and shares, or any balance between stocks and shares and cash up to the cash limit of £5,640. The official receiver should, unless the bankrupt’s regular income is paid into an ISA cash account (see paragraphs 31.5.73 and 31.5.74 for further advice), close the account and ask for the monies to be remitted to him/her. In deciding when to close the account the official receiver should follow the advice in paragraphs 31.5.90 and 31.5.91. The official receiver should arrange for any stocks and/or shares held by the bankrupt in a stocks and shares ISA to be sold and the monies remitted to him/her.

 

31.5.93 Windfalls – building society mergers and/or restructuring

When a building society merges with another financial institution or becomes a bank financial incentives such as share options or cash bonuses may be offered to existing account holders. Where an account remains open or the bankrupt continues as a borrower they remain a member of the building society and would be entitled to receive any shares or bonuses that arose.  Where the bankrupt is entitled to receive free shares or bonuses before his/her discharge they may be claimed as after-acquired property by the official receiver as trustee [Note 5].

 

31.5.94 National Savings and Investments

National Savings and Investments is one of the largest savings and investment organisations in the United Kingdom. It is best known for premium bonds (see paragraph 31.5.97) but offers a wider range of savings and investments to suit people’s needs. A full list of accounts and investments can be found here.

 

31.5.95 National Savings and Investments – accounts and investments

It is possible for a company to hold certain National Savings and Investments (NS & I) accounts, however this is likely to be a rare occurrence. If a company or bankrupt operates a NS & I account or holds premium bonds notice should be given to the Director of Savings, see paragraph 4.145 for further details, including the address. Dependent upon which account is held the company or bankrupt may hold a passbook, savings certificate or bank card. The official receiver should recover these as soon as possible wherever possible, unless a bankrupt is to be allowed to keep an account open (see paragraph 31.5.73).

 

31.5.96 National Savings & Investments – enquiry letters

Where the official receiver requires information from the NS & I all enquiry letters should be personally signed by him/her and addressed to:

 

The Head of Compliance

NS&I

1 Drummond Gate

London

SW1V 2QX

 

The NS & I will not reply to the letter unless it is personally signed by the official receiver.

 

31.5.97 Premium bonds – introduction

Premium bonds may be purchased by any person aged 16 years or over. Parents, legal guardians, grandparents or great grandparents may buy premium bonds on behalf of a person under the age of 16 years. Each bond costs £1 with a minimum holding of £100 (£50 if buying under the Regular Purchase Scheme) and the maximum is £30,000. No interest is paid on the premium bonds, instead a monthly draw is held and cash prizes awarded.

 

31.5.98 Premium bonds – realisation

All premium bonds should be realised by the official receiver however small the face value. See paragraph 31.5.99 for the only exception. Where possible the official receiver should obtain the premium bonds from the bankrupt and issue a receipt. If the official receiver is unable to obtain the premium bonds, or their numbers, he/she may still surrender them. The official receiver should obtain the standard form (available here) to allow the premium bonds to be cashed. The completed form together with the bonds, if available, should be sent to the address on the form. Where the official receiver has not been informed of the premium bond numbers the form should be accompanied by a letter explaining the position and asking for the value of the bankrupt’s holding to be remitted to him/her. The official receiver will receive the face value of the premium bonds together with any unclaimed winnings. Any unclaimed winnings should be treated as part of the bankrupt’s estate. 

 

31.5.99 Premium bonds – selling them to the bankrupt

A bankrupt may ask to keep a premium bond holding for sentimental reasons. The official receiver should consider such a request and may allow the bankrupt to purchase his/her interest in the premium bond holding, dependent upon its value. The bankrupt should be asked for the full face value of the holding plus the value of any unclaimed prizes. If the bankrupt supplies their premium bond holder’s number the details of any outstanding unclaimed prizes can be found via the NS & I website here. The website is normally updated by the third working day of each month. If the official receiver has any doubt as to the extent of the bankrupt’s holding or of any unclaimed prizes he should write to the NS & I (see paragraph 31.5.96) for details. The bankrupt should confirm in writing that they will inform the official receiver of any prizes won on draws occurring prior to his/her date of discharge and acknowledge that any monies won may be claimed as after- acquired property by his/her trustee in bankruptcy [Note 6]. 

 

31.5.100 Realisation of other National Savings investments

Where the bankrupt has savings and/or investments (see paragraph 31.5.94) other than premium bonds the official receiver should write to the NS & I (see paragraph 31.5.96) to confirm the holding. NS & I should provide a form to enable the official receiver to realise the bankrupt’s savings and/or other investments. If the pass book or savings certificate(s) are missing an alternative form may be provided. The official receiver should give any notice period required for a withdrawal on the savings account or other investment rather than forfeit any interest due.

 

31.5.101 Paypal account

A company or individual may operate a “Paypal” account. A Paypal account is similar to a current bank account and may be used for receiving and making payments for goods and/or services provided. The account may have a  credit balance.

 

31.5.102 Dealing with a Paypal account

The official receiver should send notice to Paypal Europe Limited where the company or bankrupt is known to operate a Paypal account. The address can be obtained by entering “Paypal” as a Party Name in ISCIS. A Paypal account is very similar to a bank account and the official receiver should follow the advice given in Paragraphs 31.5.70 to 31.5.76 when dealing with any credit balance.

 

31.5.103 Government bonds or stocks – gilts

“Gilts” are government bonds issued by HM Government. The most common types are conventional gilts and index-linked gilts. Conventional gilts pay a fixed rate of interest twice a year and are redeemed or repaid by HM Government on reaching their maturity date. For index-linked gilts the twice yearly interest payment is linked to the rate of inflation as is the amount redeemed or repaid on reaching their maturity date. Gilts usually have a life of between 5 and 20 years, although some have no redemption date. Gilts are listed on the London Stock Exchange and may be bought and sold prior to their maturity date. The current market price for gilts can be found in quality newspapers or can be viewed here. Further information on gilts provided by the United Kingdom Debt Management Office is available here.

 

31.5.104 Selling government bonds or stocks

Where a company or bankrupt is holding gilts the official receiver should obtain the certificates from the director or bankrupt and issue a receipt. If the company or bankrupt is part of the Crest system the advice provided in paragraph 31.5.90 should be followed. Gilts may be sold through a stockbroker or a bank. The official receiver as liquidator or trustee should only sell the gilts for the benefit of the estate where the sale proceeds are likely to be greater than the sale costs. Before instructing a broker or a bank the official receiver should ask for details of their charges to ensure a sale does not result in a loss to the estate.

 

31.5.105 Friendly Societies – tax exempt savings plan

Friendly societies may issue tax exempt savings plans. The plan may or may not include life assurance cover and is for a minimum of ten years although they may have a longer life span. The upper investment limit is £25 per month or £270 per year.

 

31.5.106 Friendly societies dealing with a tax exempt savings plan

The official receiver should send notice to the appropriate friendly society when a bankruptcy order is made against the holder of a tax exempt savings plan to prevent any unauthorised removal of funds. The official receiver should recover any documents relating to the plan from the bankrupt. Plans may be surrendered at any time although fees charged by the friendly society may reduce the amount repaid. The official receiver should follow the advice provided in paragraph 31.5.90 when deciding to close the plan. At the appropriate time a letter should be sent to the friendly society asking for the plan to be closed and the balance to be remitted to the official receiver.

 

31.5.107 Unit trusts

A unit trust is a fund controlled by professional managers who invest the monies raised in a wide variety of shares and other securities. The investor buys units in trust from the managers and is issued with a contract note. A certificate may be issued, but in some instances the contract note acts as the sole proof of purchase. The prices of unit trusts are often quoted in some newspapers.

 

31.5.108 Dealing with unit trusts

The official receiver should inform the unit trust manager of the winding-up order or bankruptcy order to prevent any unauthorised withdrawal of funds. The official receiver should recover the contract note and/or unit trust certificate from the company director(s) or bankrupt and issue a receipt. If the unit trusts are not going to be realised immediately they should be stored in the office safe. The official receiver as trustee should write to the unit trust manager asking that the unit trusts be sold and the monies realised remitted to him/her. 

 

31.5.109 Open Ended Investment Company (Oeic)

An Oeic (pronounced oik) is a fund set up by a company (rather than a trust), managed by a corporate director and protected by an independent depository. A depository is an institution, usually a bank, authorised by the Financial Services Agency to hold the legal title to the Oeic’s. An Oeic has a single price and does not have the same legal complexity as a unit trust. The monies raised are invested in a wide variety of shares and other securities. Oeics have steadily replaced unit trusts as they are easier and cheaper to manage. An investor buys shares in the company from the corporate director and is issued with a contract note. A share certificate may be issued, but in some instances the contract note acts as the sole proof of purchase. The prices of individual Oeics may be found on the internet or the website of the company who set up the fund. The official receiver should use these prices as a guide only and follow the advice provided in paragraph 31.5.110 when realising his/her interest. 

 

31.5.110 Dealing with Open Ended Investment Company (Oeic)

The official receiver should inform the corporate director of the winding-up order or bankruptcy order to prevent any unauthorised withdrawal of funds. The official receiver should recover the contract note and/or share certificate from the company director(s) or bankrupt and issue a receipt. If the Oeic shares are not going to be realised immediately they should be stored in the office safe. The official receiver as trustee should write to the corporate manager asking that the Oeic shares be sold and the monies realised remitted to him/her. 

 

31.5.111 Personal Equity Plans

Personal Equity Plans (PEPs) were introduced to encourage individuals aged 18 years or over to invest in shares whilst enjoying tax benefits. From 6 April 1999 money could no longer be invested in PEPs, although investments prior to that date continue to attract tax benefits. A PEP must be run by a registered scheme manager, for example, banks, building societies, unit trust groups and other financial institutions.

 

31.5.112 Dealing with Personal Equity Plans

The official receiver should recover from the bankrupt all documentation relating to the scheme. The scheme manager should be informed of the bankruptcy order to prevent any unauthorised withdrawal of funds. A PEP can be realised at any time, without notice. The official receiver should write to the scheme manager asking to be informed of the value of the PEP together with the exit charge, if any. An exit charge may be levied by the scheme manager. The amount of the charge is dependent upon the rules of the scheme. Where there is a benefit to the state the official receiver should write to the scheme manager asking for the PEP to be terminated and the monies remitted to him/her.

 

31.5.113 Investment trusts

Investment trusts are public limited companies that buy shares and other types of security with their capital and other income. An investor in an investment trust simply purchases shares in the company. Shares in an investment company can be traded on the Stock Exchange.

 

31.5.114 Dealing with shares in an investment trust

The official receiver should recover the share certificate, or contract note if a share certificate has not been issued, from the company director(s) or bankrupt. The official receiver should instruct a stockbroker to sell the shares (see paragraph 31.5.200 for further details).

 

31.5.115 Precious metals – coins and bullion

Gold, silver and platinum may be bought as an investment in the form of coins or bars. Investment gold coins and bullion are exempt from VAT. HM Revenues and Customs provide further information on what constitutes an investment gold coin on its website available here. However, VAT is payable on silver and platinum coins and bullion. Coins and bullion can be bought and sold through banks, coin dealers, stockbrokers or through the bullion dealing companies that make up the London Bullion Market Association. Current prices for precious metals are listed in the business section of some newspapers.

 

31.5.116 Dealing with precious metal coins and bullion

The official receiver should recover the coins and/or bullion from the company director(s) or bankrupt and issue a receipt. The coins and/or bullion would usually be stored in the official receiver’s safe pending disposal unless safe alternative arrangements are made. The official receiver must arrange adequate insurance cover. The official receiver should, in the first instance, instruct his/her local agent to sell the coins and/or bullion. The world trade in gold is transacted in US dollars so the current exchange rate between the US dollar and the pound will affect the amount realised. The official receiver should not attempt to speculate on currency movements when selling coins and/or bullion.

 

[Back to Part 4 – Cash at Bank] [On to Part 6   Life assurance and other insurance policies]