Personal finance: Minding her business

Financial Makeover: NAME Sue Grossman AGE 34 OCCUPATION Runs Blue Ribbon Events, a Corporate And Hospitality Agency

Like many women who decide to go it alone Sue Grossman has kept her feet firmly on the ground. Since she set up her business, Blue Ribbon Events, almost a year ago it has achieved a turnover of almost pounds 300,000 and she is preparing to recruit her first member of staff. However, for now she does not intend to relocate the business out of her London flat, where it is based.

Over the past few years, Sue has built up a small portfolio of individual company shares, including BT, Abbey National, Lloyds TSB, Railtrack, Rolls Royce and Thomson Holidays. The shares are now worth about pounds 25,000. She also holds about pounds 30,000 in an instant access account with Direct Line, paying 7.05 per cent gross, and has a separate account with Standard Life Bank, out of which she conducts her business finances.

So far, Sue has ploughed almost all her earnings back into the business and intends to sort out her pension planning and other financial areas on its first anniversary next month.

The adviser: Roddy Kohn, independent financial adviser at Kohn Cougar, Wellington House, Wellington Park, Clifton, Bristol, BS8 2UR (0117-946 6384).

The advice: For the past year, many of Sue's personal finances have had to take a back seat,allowing her to concentrate on setting up and establishing her business. There are now areas where planning would come in useful.

Sue already has a term assurance policy with Norwich Union for pounds 20,000, so in the event of her death all her debts will be wiped out. This is tax effective because it is linked to a personal pension, thereby enjoying the same tax benefits from the Inland Revenue as with a personal pension. Out of every pounds 10 paid into a policy in this way, the Revenue chips in pounds 2.30 for standard rate taxpayers and pounds 4 for those on the higher rate.

Perhaps one of the most important issues is whether any debts could be covered in the event of long-term illness. Sue has some capital set aside from Blue Ribbon Event's earnings. But long-term illness would eat into this.

It is clear, however, that additional critical illness cover of pounds 150,000 will be needed. Critical illness cover, which pays out a lump sum in the event of diagnosis of major diseases, including heart attacks or cancer, would go some way towards resolving this issue.

Should anything happen, she could simply choose to use the capital to repay her mortgage or any other liabilities. That's the attraction with critical illness cover; it can be used in any way Sue sees fit. This will cost in the region of pounds 25 per month through Scottish Provident.

I also have recommended that Sue take out permanent health insurance. This pays a regular income in the event of a person being off work for a long-term period for any reason. I suggest Friends Provident because this will provide an income equal to approximately half her current salary at a cost of pounds 28.71 per month.

Premiums and benefits are fixed at the outset which means Sue need not worry about rising costs in the early years. She will need to review the contract at least every three years to inflation-proof her benefits.

As far as pension planning is concerned, I originally advised Sue to sit tight for at least nine to 12 months before making a pension contribution. This is simply because we need to be sure that the profits from Blue Ribbon Events are sufficient to justify making the contribution.

Bearing in mind that the Inland Revenue allow the self-employed up to seven years to catch up with pension contributions, Sue need not be concerned about a short-term deferment of her plans. In any event when Sue's personal pension does begin, she will need to include waiver of premium cover, which continues to pay contributions into the scheme in the event of illness.

She also will need to look for the most flexible pension possible, one that allows for large lump sums to be paid in as well as regular contributions, but does not penalise savers for altering the payment level from time to time, as their earnings fluctuate. There are several companies on the market offering such products and we can discuss the benefits of each when Sue is ready to plan her contributions.

The existing pension-term-assurance contribution is sufficiently small so as not to cause concern.

When Sue starts a personal pension is it unlikely she will be in danger of paying in too much, and thereby forfeiting any tax breaks, as her current maximum contribution limit is 17.5 per cent.

Sue's cash deposits are earning reasonable rates of interest, be they with Standard Life Bank or Direct Line. If she wanted to rationalise the accounts and earn a marginally higher rate of gross interest, it would make sense to switch all the money to Standard Life Bank, which currently pays 7.35 per cent a year on deposits of more than pounds 1. Sue knows this. The key question is will Sue decide to move the money?

As for her investments, there is no doubt that Sue has done well with her share portfolio over the past two to three years.

It is sometimes difficult to re-examine things when they have proved to be such a success. Again, however, there is an underlying problem, as with most portfolios of this size, that the number of shares she owns exposes her to greater than normal risks in the event of market downturns.

As we have seen in the past week or so, this is not an idle risk: the truism about the value of shares is that they can go down and up. In such cases, I believe investors should take shelter by maximising the spread of their holdings as much as possible.

Doing so by simply dividing the portfolio into smaller units would not be economically sensible. That is why it often makes sense to look at "packaged" investments, such as unit and investment trusts, which by holding shares in a greater number of companies, helps reduce risks. Again, I have indicated this to Sue. Should she feel that she is ready, I would be happy to look at a suitable portfolio to match her needs.

Whilst these are not all the issues Sue will need in addressing the financial makeover of her business they certainly represent the most pressing ones. She has done exceptionally well in the past year. It is now up to her to take the next financial steps to help secure her future.

Blue Ribbon Events: 0171-609 7400

Arts and Entertainment
Sydney and Melbourne are locked in a row over giant milk crates
Kenny Ireland, pictured in 2010.
peopleActor, from House of Cards and Benidorm, was 68
A scene from the video shows students mock rioting
newsEnd-of-year leaver's YouTube film features staging of a playground gun massacre
Have you tried new the Independent Digital Edition apps?
Life and Style
ebookA wonderful selection of salads, starters and mains featuring venison, grouse and other game
A family sit and enjoy a quiet train journey
voicesForcing us to overhear dull phone conversations is an offensive act, says Simon Kelner
i100This Instagram photo does not prove Russian army is in Ukraine
Morrissey pictured in 2013
sportVan Gaal has £500,000 video surveillance system installed to monitor Manchester United players
View from the Llanberis Track to the mountain lake Llyn
Du’r Arddu
environmentA large chunk of Mount Snowdon, in north Wales, is up for sale
Life and Style
Martha Stewart wrote an opinion column for Time magazine this week titled “Why I Love My Drone”
lifeLifestyle guru Martha Stewart reveals she has flying robot... to take photos of her farm
Arts and Entertainment
The Secret Cinema performance of Back to the Future has been cancelled again
filmReview: Sometimes the immersive experience was so good it blurred the line between fiction and reality
Life and Style
The director of Wall-E Andrew Stanton with Angus MacLane's Lego model
gadgetsDesign made in Pixar animator’s spare time could get retail release
peopleGuitarist, who played with Aerosmith, Lou Reed and Alice Cooper among others, was 71
Tyred out: should fair weather cyclists have a separate slow lane?
environmentFormer Labour minister demands 'pootling lanes' for women cyclists
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

ES Rentals

    iJobs Job Widget
    iJobs General

    VB.Net Developer - £40k - Surrey - WANTED ASAP

    £35000 - £40000 per annum + competitive: Progressive Recruitment: .Mid Level V...

    Digitakl Business Analyst, Slough

    £40000 - £45000 per annum + Competitive Benefits: Progressive Recruitment: Dig...

    Mechanical Estimator: Nuclear Energy - Sellafield

    £40000 - £50000 per annum + Car, Medical, Fuel + More!: Progressive Recruitmen...

    Dynamics NAV Techno-Functional Consultant

    £50000 - £60000 per annum + benefits: Progressive Recruitment: An absolutely o...

    Day In a Page

    Dress the Gaza situation up all you like, but the truth hurts

    Robert Fisk on Gaza conflict

    Dress the situation up all you like, but the truth hurts
    Save the tiger: Tiger, tiger burning less brightly as numbers plummet

    Tiger, tiger burning less brightly

    When William Blake wrote his famous poem there were probably more than 100,000 tigers in the wild. These days they probably number around 3,200
    5 News's Andy Bell retraces his grandfather's steps on the First World War battlefields

    In grandfather's footsteps

    5 News's political editor Andy Bell only knows his grandfather from the compelling diary he kept during WWI. But when he returned to the killing fields where Edwin Vaughan suffered so much, his ancestor came to life
    Lifestyle guru Martha Stewart reveals she has flying robot ... to take photos of her farm

    Martha Stewart has flying robot

    The lifestyle guru used the drone to get a bird's eye view her 153-acre farm in Bedford, New York
    Former Labour minister Meg Hillier has demanded 'pootling lanes' for women cyclists

    Do women cyclists need 'pootling lanes'?

    Simon Usborne (who's more of a hurtler) explains why winning the space race is key to happy riding
    A tale of two presidents: George W Bush downs his paintbrush to pen father’s life story

    A tale of two presidents

    George W Bush downs his paintbrush to pen father’s life story
    Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover

    The dining car makes a comeback

    Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover
    Gallery rage: How are institutions tackling the discomfort of overcrowding this summer?

    Gallery rage

    How are institutions tackling the discomfort of overcrowding this summer?
    Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players

    Eye on the prize

    Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players
    Women's rugby: Tamara Taylor adds fuel to the ire in quest to land World Cup

    Women's rugby

    Tamara Taylor adds fuel to the ire in quest to land World Cup
    Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

    The day America’s love of backyard tigers led to a horrific bloodbath

    With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
    Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

    How Samuel Beckett became a French Resistance spy

    As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
    We will remember them: relatives still honour those who fought in the Great War

    We will remember them

    Relatives still honour those who fought in the Great War
    Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

    Kodak's last-ditch bid to keep celluloid alive

    Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
    Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

    Acting in video games gets a makeover

    David Crookes meets two of the genre's most popular voices