Financial Makeover: NAMES robert and jane hipwell AGES 43 and 44 OCCUPATIONS senior nhs manager and district nurse
Robert and Jane are not untypical of many professionals. The couple have two teenage daughters, Clare, who will be 18 in October, and Bethany who is 16. As they both work hard for their money, Robert and Jane want to ensure that their savings are working equally hard, particularly as they hope to retire early in their mid-fifties. Sensibly, they have decided to take stock of the family finances.

The adviser: Graham Bates is chairman at Bates Investment Services, a national firm of independent financial advisers (tel: 0113-2 955 955 or e-mail

The advice: As Robert and Jane are both members of the NHS Pension Scheme, they can look forward to excellent pension benefits on reaching retirement, although Robert would only achieve 40 years' service and a "maximum" pension at age 60.

It is possible, however, for NHS employees to take benefits early and accept a reduced pension. Benefits can also be withdrawn earlier, in the event of ill-health and in the case of redundancy. To facilitate a more flexible retirement, Robert pays pounds 133.33 each month (gross) into a Free Standing Additional Voluntary Contribution Scheme (FSAVC) with the Royal National Pension Fund for Nurses. In view of the early retirement goal, it would be sensible to maximise contributions; Robert can choose to pay up to 15 per cent of his gross salary. Jane, who enjoyed a career break to bring up the family, is now contributing the maximum permissible percentage of her salary into the NHS top-up (AVC) scheme, run by Equitable Life.

Jane and Robert have clearly given a great deal of thought to their financial planning. One of their most sensible moves has been to take out a flexible mortgage with Stroud & Swindon Building Society, which means that they have the flexibility to "overpay" the monthly repayments. This type of mortgage is becoming popular since regular "overpayments" can significantly reduce the mortgage term.

Jane and Robert have been making additional repayments of at least pounds 300 each month, although this money is likely to be redirected to help Clare when she enters university in October next year. Meanwhile, we would certainly recommend maintaining the overpayments for as long as possible. Robert should also maintain his accident, sickness and unemployment cover, as this provides an added security blanket.

Life assurance provides essential financial cover, which is particularly important during the early years of family life. However, generally speaking, as the family matures and expenditure reduces, a high level of cover may not be necessary. Robert and Jane have always maintained term assurance cover on their lives, although this is due to end shortly. We would recommend that an appropriate level of cover is renewed until both Clare and Bethany have completed higher education. It is unlikely that any life assurance protection would be necessary thereafter, particularly as the outstanding mortgage is covered separately. Cost is the only relevant factor with term assurance and it is important that Robert and Jane obtain quotations from an independent financial adviser.

The key issue for the Hipwells is to maximise capital growth for their eventual retirement. At the same time, high on the priority list is support for Clare and Bethany through their University studies. Robert has pointed out that, since it is unlikely he or Jane will have any capital lump sum to invest over the next few years, making the most of their regular savings is very important.

Currently, they each contribute to a PEP; Jane salts away pounds 50 each month in Norwich Union's International Index Tracking Fund, a global equity trust that has returned just 2.83 per cent over one year to 31 July 1998. Even the five-year figures show an unremarkable 53.76 per cent. Despite the fact that transferring the investment to an alternative manager will involve some cost, nevertheless Jane should consider doing just that. On a 10-year view we would recommend Henderson-run TR European Growth, an investment trust which has an excellent track record in this sector.

Jane should be aware that this is slightly more risky than her existing PEP but, in our opinion, the long-term growth potential is likely to be superior. Robert should continue the pounds 100 per month contribution he makes to the Fidelity Moneybuilder Index PEP, which has returned 20.64 per cent in the 12 month period to 31 July 1998. In both cases, the monthly contributions can only be maintained until 5 April next year, following which PEP investments will be replaced by the new Individual Savings Account. At that point, independent financial advice should be sought.

Robert has 225 Halifax shares, which he wisely holds inside a Fidelity PEP wrapper. The recent stock market turmoil has taken its toll on the Halifax share price, but this would not be a good time to sell. It is important to try to think about recent adverse movements in a historical context and to remember the long term benefits of equity investment. A cash "cushion" is one of the most important elements of any financial plan, and Jane puts aside pounds 200 each month as a "rainy day" fund, which is kept on deposit with Cheltenham & Gloucester. However, this represents a sizeable chunk of the monthly savings, and deposit accounts rarely offer the best option for investment over the medium and long term. With this in mind, Jane should consider redirecting a larger proportion of her monthly savings to her PEP.

Flexibility is an important factor, and the Hipwells should be advised to steer clear of fixed-term savings plans, although the existing 10-year plan with RNPFN, together with the various endowment policies, should be maintained through to maturity.

Finally, Robert and Jane are keen to know if their two daughters can improve the outlook for their own nest-eggs; money which has been set aside to give them a good start in life once they leave full-time education. They each have investments with National Savings, maturing between the years 2000 and 2002.

Depending on their individual circumstances and the date of maturity, Clare and Bethany might consider starting their own ISAs, with at least some of the capital directed towards an equity environment with the potential for real growth. pounds 1,500 a piece has also been "squirrelled" away in Sainsbury's Bank.

We suggest switching this to a growth unit trust, providing that no access will be required to the capital for at least five years, and on the basis that a medium-risk approach is acceptable.

A solid fund such as the Save & Prosper Premier UK Equity should provide excellent long-term growth potential. Clare, at 18, can of course take advantage of her own PEP allowance.