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.
13 September 2014 12:00 AM
30 August 2014 12:00 AM
05 September 2014 11:30 PM
30 August 2014 12:00 AM
The UK has slipped to 11th in the latest European league table of savers. Rob Griffin checks out the best options
22 August 2014 10:30 PM
Caroline Flint, the shadow energy secretary, says a Labour government would create a new energy regulator
22 August 2014 10:30 PM
16 August 2014 12:00 AM
16 August 2014 12:00 AM
- 1 Cyclist in Russia narrowly misses being hit by car and lorry
- 2 'F*ck it, I quit': KTVA reporter Charlo Greene quits live on air in spectacular fashion
- 3 What are your fingerprint words?
- 5 Pink Floyd new album: Band unveil cover art for first record in 20 years
Scotland could still declare independence – even without referendum, says Alex Salmond
Scottish referendum results: Cross-party consensus collapses amid Tory-Labour spat on the 'English question'
Hilary Mantel 'should be investigated by police' over Margaret Thatcher assassination story, says Lord Bell
Plebgate MP Andrew Mitchell called officer a 'little s**t', claim court documents 'exposing ex-Chief Whip's 'record of abusing police'
Archbishop of Canterbury admits doubts about existence of God
Labour Party conference: Ed Balls to set out plan to freeze child benefit to balance books
iJobs Money & Business
£65000 Per Annum Benefits + bonus: Clearwater People Solutions Ltd: If you are...
£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...
£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...
£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...
Day In a Page
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
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green