FINANCIAL MAKEOVER: Wanted: savings that stand in for earnings
A retired couple receive advice on boosting the income from their investments
Sunday 23 February 1997
Pension and benefits: Mr Doyle receives pounds 1,200 a year of pension from his former employer, the hotels and leisure group Granada. He also receives disability and mobility allowances of pounds 2,820 a year. Mrs Doyle has a pension of pounds 3,144 and receives unemployment benefit of pounds 30 a week, although she does not expect this to continue for long.
Mortgage: pounds 8,100 of a repayment mortgage outstanding, due to be paid off in four years. Monthly payments (comprising both interest and capital) are pounds 108. The property, in Cheshire, is worth around pounds 120,000; the Doyles also own a couple of acres of adjoining land.
Investments and savings: Mrs Doyle recently inherited pounds 50,000, which is currently in a postal deposit account. The Doyles also have pounds 13,000 in ordinary instant access accounts, and Mr Doyle has pounds 6,000 in a tax- free Tessa. Mrs Doyle has pounds 48,000 in just three shares, pounds 40,000 of which is from a share incentive scheme with a former employer. Mr Doyle has pounds 2,780 of Granada shares.
Mr and Mrs Doyle want to increase the income from their savings and investments while achieving some capital growth. They are concerned that the value of their savings keeps pace with inflation in case either should need nursing care later on.
What should they do?
The Doyles are already aware of the virtues of shares for long-term saving but their money is in just four different shares - a riskier investment strategy than is necessary. To get a greater spread of investments and so lower the risks of one bad share, while also fulfilling their desire for income, the Doyles should look at investing the bulk of the pounds 50,000 inheritance in income-oriented UK unit trusts.
At the same time, Mrs Doyle should take out a Tessa. She can invest pounds 3,000 in year one, rising to a total of pounds 9,000 over five years. One Tessa worth considering is that offered by the Principality building society, which pays a reasonable 6.8 per cent interest and has low penalties should Mrs Doyle want to transfer her money to another bank or building society if the Principality starts to look uncompetitive.
Personal equity plans will also give a tax-free income and the Doyles should consider putting pounds 6,000 each into PEPs before the end-of-tax-year deadline. It is possible to get a tax-free income of 10.8 per cent a year with some capital growth by buying the income shares of Gartmore's British Income and Growth investment trust for these PEPs. Generally, it might be worth the Doyles not having the same PEPs, but the high income available from the Gartmore trust means other investments do not have to be as income- oriented.
The bulk of the remaining inheritance should be split between a number of unit trusts: GT Income (income 3.8 per cent), Credit Suisse (4.3 per cent), Jupiter Income (4 per cent), Schroder Income (4.5 per cent), Mercury Income (4.2 per cent), and - for growth - GT Orient, which invests in the high-growth economies of the Far East.
With any PEPs the Doyles take out in the 1997-98 tax year, they should look for those that will also accept windfall shares from building societies, to save tax on the dividends.
The change-over to the self-assessment tax system may induce the Doyles to consider a portfolio management service, which will help them collate dividend information for the taxman. Services are offered by a number of companies, including Rothschild Asset Management and Singer & Friedlander.
The Doyles should ensure assets are distributed between them to optimise individual tax allowances. A further way of increasing their disposable income might be to pay off their remaining mortgage early, but they should check for penalties in doing this. They could also consider selling the land adjoining their house.
The Doyles cannot take advantage of the generous tax breaks available on personal pension plans for retirement saving because they do not have earned income to save. But in four years' time Mrs Doyle will start receiving the state pension, which will increase the couple's income.
Finally, neither has a will, and they should set these up. The Doyles do not have any children but should not assume that if one of them were to die the spouse would automatically inherit everything. Without wills, they could find assets ending up with other family members.
Mr and Mrs Doyle were talking to David Wilson of Blackfriars Financial Services, an independent financial adviser based in Sandbach, Cheshire, which is part of the Burns Anderson network of IFAs.
If you would like to be considered for a financial makeover, write to Steve Lodge, personal finance editor, Independent on Sunday, 1 Canada Square, Canary Wharf, London E14 5DL.
06 May 2015 09:39 AM
One reader’s monthly direct debit charge has been increased by 62 per cent
05 May 2015 02:09 PM
Many Londoners who live in social housing estates are not allowed to switch because their landlord has ‘locked’ them in to buying from one supplier
24 April 2015 07:30 PM
01 May 2015 12:00 AM
More than £60m was paid out to more than 2 million prizewinners this month
28 April 2015 05:20 PM
Why can’t we just have open and honest charges, without all the cross-subsiding?
28 April 2015 03:50 PM
With the pound at a high against the euro, it pays to buy now before uncertainty post-election
17 April 2015 06:00 PM
23 April 2015 12:00 AM
Experts disagree about the 7% increase over the past year
22 April 2015 07:29 AM
Too many mortgages are being sold with misleading gimmicks
21 April 2015 09:54 AM
The firm’s revenues slumped by a third to £217 million in 2014
21 April 2015 12:00 AM
The average quote for a buildings and contents policy has fallen by 3.6 per cent
10 April 2015 07:00 PM
15 April 2015 12:56 PM
Joining Barclays Blue Rewards costs £3 a month but then lets customers in for handouts of up to £15 a month
15 April 2015 07:27 AM
A charity is urging anyone struggling financially to see if they could get help from the state
13 April 2015 11:39 AM
Video: With an election looming, a hung parliament could hit sterling
- 2 Qataris pledge to expand Canary Wharf
- 3 #JeSuisEd: People share photos of themselves eating awkwardly in solidarity with Labour leader
- 4 Women think Irish men are the sexiest, survey finds
- 5 Florida couple forced to register as sex offenders for having sex on public beach
In defence of liberal democracy
General Election 2015: Post-election 'shambles' looms as 70 per cent of voters say SNP 'should not be able to veto UK government policies'
The Rothschild Libel: Why has it taken 200 years for an anti-Semitic slur that emerged from the Battle of Waterloo to be dismissed?
General Election 2015: UK will be 'run for the wealthy and powerful' if Tories retain power, Labour warns
General election live: SNP suspends two members for disrupting Labour rally
General election live: Booths open at 7am across the country on polling day
iJobs Money & Business
£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...
£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...
£27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...
£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...
Day In a Page
Set over three storeys, this unusual two-bedroom townhouse has many character features including high ceilings, arched windows, exposed beams and original church doors.
Located in the University area, this semi-detached five-bedroom home is arranged over three floors - there's even a rear garden and off-road parking too.
Only a few minutes' drive from the charming town of Marlow, this two-bedroom home sits on the private riverside estate of Harleyford.
This detached four-bedroom home in Middleyard is arranged over two floors, with features that include a wood-burning stove and bespoke oak staircase.
In a row of eight detached Georgian residences, this five-bedroom home offers views of The Sound, Mount Edgcumbe and Cornwall from its impressive veranda and full-length balcony.
If you love cooking for friends this two-bedroom flat - complete with views of the iconic Battersea Power Station and an open-plan kitchen/dining area - will go down a treat.
Located above Grasmere village, this five-bedroom home is arranged over three floors and offers countryside views across Grasmere Lake towards Silver Howe.
Surrounded by the Western fells, this five-bedroom Georgian home retains many original features including panel-plastered ceilings, sash windows and fireplaces.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B, subject to change of use permissions.
A former period coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, office, kennels and an outbuilding that's currently used as a gym.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This four-bedroom detached home comes with a double carport, useful workshop, garden and two walkways that offer views of the adjacent countryside.
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
This four-bedroom home has exposed brick chimneys and a vaulted ceiling in a breakfast room that's ideal for summer entertaining - the doors open to the patio and garden.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.
This four-bedroom detached home comes with grounds that span to approximately 2.5 acres, as well as two large patio areas and a double garage.
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house