Financial makeover: How best to harness your assets

Ronald Cleland, 45, lives with his long-time partner, Linda Cordelro, 43, on a small-holding in Llandeilo, west Wales. He earns pounds 24,000 as a complaints officer for the social services department of the local authority, while she earns pounds 17,000 as a teacher. They have no dependants.

They pay pounds 320 a month on a pounds 40,000 repayment mortgage on the small-holding, which is worth around pounds 90,000. They want to refurbish the property, which requires a lot of work, at an expected cost of pounds 20,000 to pounds 30,000.

The present value, say the couple, is in the large number of farm buildings and the small-holding's location in traditional rural Wales.

Linda also owns a flat in Shepherd's Bush, west London, on which there is a pounds 23,000 mortgage. The flat has been put up for sale and they expect to get pounds 60,000.

Both have employer-provided "final salary" pensions, in which their eventual pension will be directly related to their earnings.

They intend to "buy back years" to increase their benefits. They also have a number of life insurance policies offering more than pounds 100,000 cover that cost about pounds 55 a month.

The couple own seven horses ranging in age from seven to 36 which, along with stable equipment, are worth around pounds 18,000. This "hobby" is a big drain on their income.

The couple would like to be more efficient with their money (wouldn't we all?). They own two properties - will they face tax on the profits from selling the London flat? Should they get married - would that help their financial situation and security?

What a financial adviser recommends:

Getting married would be advantageous pension-wise, although nowadays there are few other financial advantages. As with all too many traditional public sector pension schemes, if Ronald or Linda were to die the survivor would only be entitled to any ongoing pension or one-off benefit if the couple were married. As things stand, even as long-time partners, the survivor would be left high and dry by the other's pension fund.

Because Linda's London flat is not her "principal place of residence" she would be liable for capital gains tax on any profits in excess of pounds 6,500. Getting married would not help here, but if Linda were to transfer the property into both their names before selling it then Ronald might be able to use his tax-free capital gains tax allowance as well to minimise the overall tax bill on the profits. Together these should significantly reduce the tax bill.

The couple need to get quotes from their respective pension schemes for "buying back years" to boost pensions. This bit should be fairly straightforward. However, they do need to compare the cost with the likely benefit because the couple will not have a lot of spare money even after the London flat is sold as most of the proceeds have been earmarked for refurbishing the small-holding.

They could probably make some savings on their life insurance by switching companies and consolidating their policies without reducing the cover. However, this will not amount to a lot of money.

The couple should be careful not to try to run before they can walk. Although ideally they could do with some other savings, the insurance and pensions should be the priorities. Linda and Ronald expect cash to be freed up over time as horses are not replaced. Ronald would like to look at traded endowment policies.

These can suit cautious investors, although there are more tax-efficient alternatives such as personal equity plans.

Ronald Cleland and Linda Cordelro were talking to Clive Carroll of Overton- Carroll Financial Services, a Swansea-based independent financial adviser and member of the Financial Options network of IFAs.

If you would like to be considered for a financial makeover for publication, write to Steve Lodge, personal finance editor, Independent on Sunday, 1 Canada Square, Canary Wharf, London E14 5DL. Fax: 0171-293 2096 or 2098; e-mail: Please include details of your current financial situation, a daytime telephone number, and state why you think you need a makeover.