Personal finance: Financial Makeover - Money without tears

Financial Makeover: NAME: PETER LORD AGE: 48 OCCUPATION: SELF- EMPLOYED COMPUTER CONSULTANT

Peter is divorced and has a 17-year-old son who lives with his mother nearby. His income is variable but averages approximately pounds 50,000 per annum.

His home has no outstanding mortgage. Peter has managed to save and build up capital in various building-society accounts. The majority is held in the Cheltenham and Gloucester Instant Transfer Account, which pays a competitive interest rate with instant access.

Some of the remaining accounts were opened to benefit from carpetbagging. In addition to this, Peter has a Tessa with Birmingham Midshires; this account has been earmarked for a future project.

He also has pounds 2,500 invested in National Savings Premium bonds, but returns have been disappointing. His only investment into equities is 167 shares in Eurotunnel, his reason being that he was born in Folkestone.

In the past, Peter's experience in investment has been disastrous. In 1983 he bought 14 Krugerrands at about pounds 290 each, and eventually sold them 10 years later for about the same price. In August 1988 he purchased a share in a flat for pounds 15,000 and subsequently sold it in August 1991 for pounds 8,000, a loss of some pounds 7,000.

Peter wants to improve on the returns he is currently receiving from his building society, and to maximise his future retirement income.

The adviser

Bryan Bull is an associate director with the Aitchison and Colegrave Group, independent financial advisers, Suite One, Berkeley House, 15 Hay Hill, Mayfair, London W1X 7LG (0171-499 0990).

The advice

Peter opened a regular contribution personal pension contract in 1984 with Sun Alliance, now Royal and Sun Alliance, investing in the traditional with-profits fund. In 1987 he invested a single contribution of pounds 2,000. These contracts are the old-style "retirement annuity contracts" and have a guaranteed fund value at normal retirement age of 65 and also a guaranteed annuity rate.

With current annuity rates at an all-time low and interest rates looking as though they will fall further, this is a valuable option.

The existing pension contract should be maintained at its current funding level (pounds 450 per month) in order to take advantage of the valuable guaranteed future fund values and the guaranteed annuity rates (pounds 10.93p per annum per pounds 1,000).

Additional single premiums should be made annually to take advantage of personal pension legislation allowing higher contributions to be made. At Peter's age, 48, up to 25 per cent of net relevant earnings can be paid in, as opposed to 17.5 per cent under his existing retirement annuity contracts. This will offer Peter the opportunity to diversify his investment and offer greater flexibility in the future.

I recommend a single contribution of pounds 7,000 gross to the Scottish Equitable Personal Pension contract selecting the Global fun, which invests in a wide range of world-wide equities, predominately in the UK and Europe. As Peter is a higher-rate taxpayer this will reduce his tax bill by pounds 2,800. He could also utilise carry back/carry forward provisions for underpaid contributions in previous years, further cutting his tax bill.

Peter's Tessa was set up three years ago with Birmingham Midshires Building Society, making maximum contributions, and these should be maintained until maturity.

With regard to Peter's building society deposits, many should be maintained in order not to prejudice any potential windfalls. However, interest rates continue to fall, and we have already seen bank base rates fall from 7.25 per cent to 6 per cent per annum over the course of the last few months. Accounts with societies that are not likely to demutualise should be closed and the proceeds reinvested.

Peter has indicated that he would be prepared to invest a proportion of his capital into asset-backed investments adopting a balanced attitude to risk. He is also interested in an exposure to Europe.

As Peter has no other equity investments (apart from Eurotunnel) my recommendation would be to invest pounds 6,000 into a unit trust personal equity plan with Jupiter. The money should be split equally, placing pounds 3,000 in the Income fund and a further pounds 3,000 in the European fund.

The Jupiter fund invests in a wide range of UK equities and since its launch in 1987 has achieved consistent first-quartile ranking, which means that it has always been within the top quarter of funds in its sector. The European fund invests in a wide range of equities from the European community, and has also managed to achieve consistent first-quartile ranking.

As personal equity plans will be replaced by Individual Savings Plans (ISAs) on 6 April 1999, Peter should consider a further investment of up to pounds 7,000 in three months' time, to achieve greater diversification.

News
Young Winstone: His ‘tough-guy’ image is a misconception
people
Sport
Adnan Januzaj and Gareth Bale
footballManchester United set to loan out Januzaj to make room for Bale - if a move for the Welshman firms up
Arts and Entertainment
Ellie Levenson’s The Election book demystifies politics for children
bookNew children's book primes the next generation for politics
News
Outspoken: Alexander Fury, John Rentoul, Ellen E Jones and Katy Guest
newsFrom the Scottish referendum to the Ice Bucket Challenge, our writers voice their opinions
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
Life and Style
ebookNow available in paperback
ebooks
ebookPart of The Independent’s new eBook series The Great Composers
News
i100
Sport
Yaya Sanogo, Mats Hummels, Troy Deeney and Adnan Januzaj
footballMost Premier League sides are after a striker, but here's a full run down of the ins and outs that could happen over the next month
Arts and Entertainment
L to R: Hawkeye (Jeremy Renner), Captain America (Chris Evans) & Black Widow (Scarlett Johansson) in Avengers Assemble
film
News
Nigel Farage celebrates with a pint after early local election results in the Hoy and Helmet pub in South Benfleet in Essex
peopleHe has shaped British politics 'for good or ill'
Arts and Entertainment
Pharrell Williams' “Happy” was the most searched-for song lyric of 2014
musicThe power of song never greater, according to our internet searches
Sport
Tim Sherwood raises his hand after the 1-0 victory over Stoke
footballFormer Tottenham boss leads list of candidates to replace Neil Warnock
Arts and Entertainment
Sink the Pink's 2013 New Year's Eve party
musicFour of Britain's top DJs give their verdict on how to party into 2015
Voices
Strictly Come Dancing was watched by 6.9m viewers
voicesIt has been hard to form generally accepted cultural standards since the middle of the 19th century – and the disintegration is only going to accelerate, says DJ Taylor
Arts and Entertainment
Roffey says: 'All of us carry shame and taboo around about our sexuality. But I was determined not to let shame stop me writing my memoir.'
books
News
i100
News
Caplan says of Jacobs: 'She is a very collaborative director, and gives actors a lot of freedom. She makes things happen.'
people
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs General

    Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

    Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

    Ashdown Group: Senior Marketing Executive- City of London, Old Street

    £40000 - £43000 per annum + benefits: Ashdown Group: Senior Marketing Executiv...

    Ashdown Group: Marketing Manager

    £40000 - £43000 per annum + benefits: Ashdown Group: An international organisa...

    Ashdown Group: Internal Recruiter -Rugby, Warwickshire

    £25000 - £30000 per annum: Ashdown Group: Internal Recruiter -Rugby, Warwicksh...

    Day In a Page

    War with Isis: The West needs more than a White Knight

    The West needs more than a White Knight

    Despite billions spent on weapons, the US has not been able to counter Isis's gruesome tactics, says Patrick Cockburn
    Return to Helmand: Private Davey Graham recalls the day he was shot by the Taliban

    'The day I was shot by the Taliban'

    Private Davey Graham was shot five times during an ambush in 2007 - it was the first, controversial photograph to show the dangers our soldiers faced in Helmand province
    Revealed: the best and worst airlines for delays

    Revealed: the best and worst airlines for delays

    Many flyers are failing to claim compensation to which they are entitled, a new survey has found
    The stories that defined 2014: From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions

    The stories that defined 2014

    From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions
    Stoke-on-Trent becomes first British city to be classified as 'disaster resilient' by the United Nations

    Disaster looming? Now you know where to head...

    Which British city has become the first to be awarded special 'resilience' status by the UN?
    Finally, a diet that works: Californian pastor's wildly popular Daniel Plan has seen his congregation greatly reduced

    Finally, a diet that works

    Californian pastor's wildly popular Daniel Plan has seen his congregation greatly reduced
    Say it with... lyrics: The power of song was never greater, according to our internet searches

    Say it with... lyrics

    The power of song was never greater, according to our internet searches
    Professor Danielle George: On a mission to bring back the art of 'thinkering'

    The joys of 'thinkering'

    Professor Danielle George on why we have to nurture tomorrow's scientists today
    Monique Roffey: The author on father figures, the nation's narcissism and New Year reflections

    Monique Roffey interview

    The author on father figures, the nation's narcissism and New Year reflections
    Introducing my anti-heroes of 2014

    Introducing my anti-heroes of 2014

    Their outrageousness and originality makes the world a bit more interesting, says Ellen E Jones
    DJ Taylor: Good taste? It's all a matter of timing...

    Good taste? It's all a matter of timing...

    It has been hard to form generally accepted cultural standards since the middle of the 19th century – and the disintegration is only going to accelerate, says DJ Taylor
    Olivia Jacobs & Ben Caplan: 'Ben thought the play was called 'Christian Love'. It was 'Christie in Love' - about a necrophiliac serial killer'

    How we met

    Olivia Jacobs and Ben Caplan
    Bill Granger recipes: Our chef's breakfasts will revitalise you in time for the New Year

    Bill Granger's healthy breakfasts

    Our chef's healthy recipes are perfect if you've overindulged during the festive season
    Transfer guide: From Arsenal to West Ham - what does your club need in the January transfer window?

    Who does your club need in the transfer window?

    Most Premier League sides are after a striker, but here's a full run down of the ins and outs that could happen over the next month
    The Last Word: From aliens at FA to yak’s milk in the Tour, here’s to 2015

    Michael Calvin's Last Word

    From aliens at FA to yak’s milk in the Tour, here’s to 2015