How to keep your head when the axe falls
FINANCIAL MAKEOVER; In the second of our series, a reader receives expert advice on the best way to use his redundancy cash
Sunday 09 February 1997
Occupation: Mr Parris was made redundant in December by the BBC, where he designed sets. Mrs Parris has her own business as scenic artist, painting backdrops for advertisements and the like.
Salary: Mrs Parris earns pounds 5,000 a year, Mr Parris was on pounds 40,000. He was given pounds 64,000 in redundancy, having worked for the BBC since 1977, and is owed a further pounds 4,000.
Pension: Mr Parris has a BBC pension into which he has just put pounds 15,000 of his redundancy money. Mrs Parris has a personal pension with Allied Dunbar.
Mortgage: Paid off, on a house in Chiswick, London, worth between pounds 350,000 and pounds 400,000.
Savings and investments: pounds 34,500 in the bank, pounds 25,000 in the building society, pounds 8,500 in a tax-exempt special savings account , pounds 20,000 in premium bonds, nearly pounds 20,000 in shares and pounds 2,500 in National Savings for the children.
Like it or not, Mr Parris is leaving behind 18 years on a salary with the BBC and entering the world of self-employment. His wife is already self-employed but with two young children her earnings have been relatively low in recent years.
Mr Parris wants to know what to do with his redundancy money, both to get the most from it and to meet his family's financial needs.
These include school fees totalling pounds 7,750 a year. The oldest daughter has a place at Roedean girls' school starting in the autumn, which would cost a further pounds 14,000 a year. Mr and Mrs Parris, while keen for her to go, are concerned at the cost.
What should they do?
Notwithstanding Mr Parris's redundancy, in a number of other ways the family is in good financial shape. They have no mortgage on what is a valuable house, and at worst could always trade down to use some of this capital. Mrs Parris, while not earning much at the moment, has in the past earned pounds 60,000 in a year and is adamant there is plenty of work around for her if she chooses to take it.
That said, now is not the time to be lobbing all that redundancy money into long-term investments like stocks and shares and personal equity plans. Until the family's future income pattern is established (Mr Parris is setting himself up as a freelance production designer, while Mrs Parris may increase her workload) they should keep the money in the building society.
Given the amount of money they have, they can afford to put some in notice accounts to get more interest. Postal accounts can also be a good way of squeezing more interest out of savings.
For the next few months school fees can be met from the pounds 4,000 owed by the BBC and, if necessary, existing capital until income picks up. They should really be thinking about meeting school fees out of income, although that might need reconsidering depending on how the couple's earnings pick up again in the future. With this in mind, a decision regarding their eldest daughter going to Roedean should (and can) be put on hold for a few months.
Neither Mr nor Mrs Parris have any life insurance, nor insurance should they not be able to work through ill-health.
Life insurance and what is called critical illness insurance should be priorities as financial safety nets for the family should the worst happen. Income protection insurance, also called permanent health insurance, which pays out a percentage of income, can wait a few months, until it is clear what earnings they have and therefore what should be protected. A full review of their pension plans is also necessary, but again this can wait a little. They need to think about what level of income they will need when they retire, from which a required level of saving can be established.
Finally, the Parrises wisely made wills last year. Given the value of their house, if they were to die the estate would be subject to inheritance tax. This, however, has been described as an avoidable tax in that there are wheezes for reducing your potential liability. Their wills need to be re-examined to ensure they are making full use of relevant allowances.
The Parris family were talking to Alastair Conway of The Conway Partnership, independent financial advisers in south-west London.
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.
Board creates magnetic field to achieve lift
Like Madonna, Sister Cristina Scuccia's video is also set in Venice
Singer says the track was 'force-fed down people's throats'
techThe original free dating app will remain the same, developers say
Endangered species spotted in a creek in the Qinling mountains
Trend which requires crisps, a fork and a strong stomach is sweeping Mexico's streets
Some experiencing postnatal depression don't realise there is a problem. What can be done?
17 October 2014 07:08 PM
Going down the wrong road: parking fines are nudging people into debt difficulties
17 October 2014 07:58 PM
Stacks of income: Drax is among the companies in Neil Woodford’s portfolio that he believes will pay strong dividends
17 October 2014 07:23 PM
Don't panic, it’s a wise idea to check investments regularly to ensure they are on target for your hoped-for returns
17 October 2014 08:18 PM
With little or no wage growth being seen in the UK, increasing house-price inflation could see the number of first-time buyers slide further, unless there’s a new accelerated house building programme
17 October 2014 07:19 PM
You should ignore the headline offers and trickery and work out the total cost of borrowing under different deals
17 October 2014 07:24 PM
Denise Leigh, who appeared in a production of Rigoletto with Alan Opie, was left without an essential service
10 October 2014 06:13 PM
A charity has calculated the cost to us all of unmanageable debt – from lost productivity to the extra demands on the NHS
10 October 2014 06:36 PM
The regulators are at last tackling the high-profile payday lenders, but they appear to be ignoring the growing problem of internet loan firms
10 October 2014 06:35 PM
As the cold weather hits, the question of soaring bills will be felt by each of us at home
10 October 2014 06:55 PM
Nikki Galloway (above) sells jewellery via her own website as well as on Facebook, Amazon and Bouf
10 October 2014 07:17 PM
Queenstown on Lake Wakatipu in New Zealand. The country’s stock market was boosted last month on John Key’s re-election
10 October 2014 07:29 PM
Royal Mail is cutting its small parcel charges from 20 October
03 October 2014 07:08 PM
Anyone who moved to countries including Australia, Canada, South Africa and a 100 other places, have had their pensions frozen at the rate it was paid at when they left the country
03 October 2014 06:52 PM
Every fund has good years and bad, but consistent underperformance over a number of years points to something more fundamental
03 October 2014 07:38 PM
Nick Train thinks luxury fashion brand Burberry is one of the companies that has prospered in digital marketing
- 1 Jack the Ripper: Scientist who claims to have identified notorious killer has 'made serious DNA error'
- 2 Banksy arrest hoax: Internet duped by fake online report claiming artist's identity has been revealed
- 3 Drink alcohol and eat meat to improve male fertility - but cut down on coffee, studies suggest
- 4 Former East 17 frontman Brian Harvey turns up at Downing Street and 'demands to speak to Prime Minister'
- 5 The inventor of the Facebook 'like' button says he never made a 'dislike' button because he feared the 'unfortunate consequences'
Cameron is warned 'no possibility' of UK reducing immigration and that bid to bring in quota on migrant workers would be illegal
Residents should throw a street party and mix with immigrant neighbours, councils told
Russell Brand threatened with arrest after filming outside Fox News headquarters
London bus driver 'kicks gay couple off for kissing'
Lord Freud: Tory welfare minister apologises after saying disabled people are 'not worth’ the minimum wage
Lord Freud hangs on as MPs of all parties 'call for his head' over disability comments
iJobs Money & Business
£23000 - £26000 Per Annum: Clearwater People Solutions Ltd: Our client is curr...
£25 - 30k: Guru Careers: A Corporate Actions Administrator / Operations Admini...
£18 - 23k + Benefits: Guru Careers: We are seeking a Customer Service Executiv...
£60 - 65k + Benefits: Guru Careers: We are seeking a ASP.NET Web Developer / ....
Day In a Page
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village