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

The Parris family: Mr Parris is 45, his wife, 42. They have four children aged 3, 4, 13, and 16.

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.

A 1930 image of the Karl Albrecht Spiritousen and Lebensmittel shop, Essen. The shop was opened by Karl and Theo Albrecht’s mother; the brothers later founded Aldi
Arts and Entertainment
Standing the test of time: Michael J Fox and Christopher Lloyd in 'Back to the Future'
filmA cult movie event aims to immerse audiences of 80,000 in ‘Back to the Future’. But has it lost its magic?
Arts and Entertainment
Flora Spencer-Longhurst as Lavinia, William Houston as Titus Andronicus and Dyfan Dwyfor as Lucius
theatreThe Shakespeare play that proved too much for more than 100 people
exclusivePunk icon Viv Albertine on Sid Vicious, complacent white men, and why free love led to rape
Have you tried new the Independent Digital Edition apps?
Arts and Entertainment
Stir crazy: Noel Fielding in 'Luxury Comedy 2: Tales from Painted Hawaii'
comedyAs ‘Luxury Comedy’ returns, Noel Fielding on why mainstream success scares him and what the future holds for 'The Boosh'
Life and Style
Flow chart: Karl Landsteiner discovered blood types in 1900, yet scientists have still not come up with an explanation for their existence
lifeAll of us have one. Yet even now, it’s a matter of debate what they’re for
Arts and Entertainment
'Weird Al' Yankovic, or Alfred Matthew, at the 2014 Los Angeles Film Festival Screening of
musicHis latest video is an ode to good grammar. But what do our experts think he’s missed out?
Colombia's James Rodriguez celebrates one of his goals during the FIFA World Cup 2014 round of 16 match between Colombia and Uruguay at the Estadio do Maracana in Rio de Janeiro, Brazil
sportColombian World Cup star completes £63m move to Spain
Fair trade: the idea of honesty boxes relies on people paying their way
travelIt seems fraught with financial risk, but the policy has its benefits
Arts and Entertainment
booksThe best children's books for this summer
Life and Style
News to me: family events were recorded in the personal columns
techFamily events used to be marked in the personal columns. But now Facebook has usurped that
Finacial products from our partners
Property search
All the signs have been pointing up for buy-to-let, but there are clouds on the horizon

Buy-to-let: is it a boom or a bubble fit to burst?

People borrowing to be landlords could face the same restrictions as homebuyers, with MPs voicing fears that property speculation may be overheating the market

Moment of truth for payday lenders: Watchdog plans to curb cost of short-term loans

The chief of the City watchdog, Martin Wheatley, spoke exclusively to The Independent's Simon Read about its attempts to control the worst excesses of unscrupulous high-cost credit companies

Consumers given power to choose a green deal

How would you like to be able to choose how your electricity is made and even where it come from? It may sound futuristic and fanciful but the independent supplier Co-operative Energy has made it a reality this week.

'Scrap the trap': calls for change grow as banks are told to play fair with loyal savers

City regulator says existing customers suffer worst rates

Motor insurers divided on proposals for whiplash ban

MPs want medical evidence for claims. Will this bring higher premiums?

British Gas repays £1m for mis-sold deals

British Gas was yesterday forced to pay back £1m to its customers after mis-selling them energy deals.

Bare necessities of life cost a pensioner £10,000

Pensioners now have to spend £10,387 a year on basic necessities such as food and fuel. new figures published today reveal.

Six months since its introduction, Obamacare has set market's pulse racing

As America's health reforms take effect, some firms look well placed to benefit, says Simon Read

Holidaymakers warned over hidden charges when opting to pay in sterling abroad

Fresh warnings emerged this week that overseas retailers and hotels aren't playing fair.

Employees will be able to request flexible hours in drive to make workplaces family friendly

From next week employees will be able to request changes to working hours. Rob Griffin weighs up the options

E2Energy's wind-turbine scheme offers green investors 7.5 per cent a year

If you're fed up with paltry returns on your savings and are interested in green energy, a new loan-based crowdfund launched this week could be a better home for your cash.

Why miss the chance of tax-free returns as Isas raise their game?

The tax-free limit of £15,000 is a big jump and rates for savers are starting to edge up, writes Simon Read
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 Money & Business

    Programme Director - Conduct Risk - London

    £850 - £950 per day: Orgtel: Programme Director - Conduct Risk - Banking - £85...

    Business Analyst (Agile, SDLC, software)

    £45000 - £50000 Per Annum + excellent benefits: Clearwater People Solutions Lt...

    Finance Manager - Bank - Leeds - £300/day

    £250 - £300 per day + competitive: Orgtel: Finance Manager - Accountant - Bank...

    Compliance Officer - CF10, CF11, Compliance Oversight, AML, FX

    £100000 - £120000 per annum + BONUS + BENEFITS: Harrington Starr: A leading fi...

    Day In a Page

    Noel Fielding's 'Luxury Comedy': A land of the outright bizarre

    Noel Fielding's 'Luxury Comedy'

    A land of the outright bizarre
    What are the worst 'Word Crimes'?

    What are the worst 'Word Crimes'?

    ‘Weird Al’ Yankovic's latest video is an ode to good grammar. But what do The Independent’s experts think he’s missed out?
    Can Secret Cinema sell 80,000 'Back to the Future' tickets?

    The worst kept secret in cinema

    A cult movie event aims to immerse audiences of 80,000 in ‘Back to the Future’. But has it lost its magic?
    Facebook: The new hatched, matched and dispatched

    The new hatched, matched and dispatched

    Family events used to be marked in the personal columns. But now Facebook has usurped the ‘Births, Deaths and Marriages’ announcements
    Why do we have blood types?

    Are you my type?

    All of us have one but probably never wondered why. Yet even now, a century after blood types were discovered, it’s a matter of debate what they’re for
    Honesty box hotels: You decide how much you pay

    Honesty box hotels

    Five hotels in Paris now allow guests to pay only what they think their stay was worth. It seems fraught with financial risk, but the honesty policy has its benefit
    Some are reformed drug addicts. Some are single mums. All are on benefits. But now these so-called 'scroungers’ are fighting back

    The 'scroungers’ fight back

    The welfare claimants battling to alter stereotypes
    Amazing video shows Nasa 'flame extinguishment experiment' in action

    Fireballs in space

    Amazing video shows Nasa's 'flame extinguishment experiment' in action
    A Bible for billionaires

    A Bible for billionaires

    Find out why America's richest men are reading John Brookes
    Paranoid parenting is on the rise - and our children are suffering because of it

    Paranoid parenting is on the rise

    And our children are suffering because of it
    For sale: Island where the Magna Carta was sealed

    Magna Carta Island goes on sale

    Yours for a cool £4m
    Phone hacking scandal special report: The slide into crime at the 'News of the World'

    The hacker's tale: the slide into crime at the 'News of the World'

    Glenn Mulcaire was jailed for six months for intercepting phone messages. James Hanning tells his story in a new book. This is an extract
    We flinch, but there are degrees of paedophilia

    We flinch, but there are degrees of paedophilia

    Child abusers are not all the same, yet the idea of treating them differently in relation to the severity of their crimes has somehow become controversial
    The truth about conspiracy theories is that some require considering

    The truth about conspiracy theories is that some require considering

    For instance, did Isis kill the Israeli teenagers to trigger a war, asks Patrick Cockburn
    Alistair Carmichael: 'The UK as a whole is greater than the sum of its parts'

    Alistair Carmichael: 'The UK as a whole is greater than the sum of its parts'

    Meet the man who doesn't want to go down in history as the country's last Scottish Secretary