Wealth Check: 'I do not want further debt on my credit card'

Samantha Jackson works on the events team at Outward Bound, a young people's educational charity. She is Australian, likes to travel - especially on short breaks around Europe - and is training for the London Marathon. Ms Jackson wants to find out about health cover and pension schemes, as she has no pension. She also wishes to save for a holiday with her sister, who will be visiting from Australia in the new year, as she does not want to incur further debt.

Ms Jackson was a victim of identity theft earlier this year, and wants to know if she is likely to be a victim again, and if it will affect her when applying for a mortgage of paying off her debts.

We put her case to Patrick Connolly at John Scott and Partners, Paul Byles at Towry Law, and Ben Yearsley at Hargreaves Lansdown.

SAMANTHA JACKSON, 28, CHARITY WORKER

Salary: £20,000.

Education: Bachelor of Teaching & Bachelor of Social Work.

Debt: £1,200 on Visa card. No overdraft.

Property: Renting.

Savings: Nominal amount in NatWest ISA. Paying £200 a month by direct debit.

Investments: None.

Pension: None.

Monthly outgoings: Rent £250; with £400 to £450 left over after credit card repayments, mobile phone, bills and gym membership.

DEBT AND SAVINGS

Mr Connolly cautions that Ms Jackson is likely to be earning less interest on her Isa than she is paying on her Visa card. If so, she should use her savings to pay off her card debts first. As Ms Jackson's income exceeds her outgoings, she should be able to do this quickly.

Then she should build up a cash reserve for emergencies. Her cash Isa is a good starting point. Once she has taken the holiday, she could start thinking of longer-term, equity based investments. Mr Yearsley advises everyone should have six months' income in cash reserves, although some advisers say three months' is enough. Abbey is currently the most competitive mini-cash Isa provider, paying 5.35 per cent.

Mr Byles commends Ms Jackson for setting up a direct debit to her Isa, as regular monthly savings are the best way to build up a reserve, and suggests Ms Jackson could consider putting money into equities, starting first with a UK-based fund. Unit trusts and investment trusts accept contributions from £50 a month.

PENSIONS AND HEALTH COVER

Mr Connolly points out that although pensions are tax-effective, they are not that flexible. He says Ms Jackson should prioritise cutting her debts. She could then combine a pension with Isas; the latter are not as tax-efficient as pensions but do not retain money for as long.

Mr Yearsley says Ms Jackson's first port of call for a pension should be her employer. By law, they must have set up a Stakeholder pension scheme even if they do not contribute to it. The advantage of a pension, though, is up-front tax relief, with tax-free growth in the pension fund until retirement.

Mr Byles recommends Ms Jackson clears her debts first. But once she has done that, and set aside an emergency cash fund, she should look at her pension. If she cannot join a workplace scheme, she can pay up to 17.5 per cent of her salary into a Stakeholder plan. Mr Yearsley cautions that, with no dependents, there is no need for her to pay for life assurance. She could consider permanent health or critical illness cover.

Mr Byles advises Ms Jackson to check sick pay arrangements with her employer. She could then dovetail any income protection plan into her workplace arrangements.

Mr Connolly also suggests an income protection policy. This will cover her income if Ms Jackson is off work longterm due to illness or injury. She should check first whether her employer provides any cover.

IDENTITY THEFT

Mr Yearsley says that just being a victim of fraud should not affect Ms Jackson's credit history. But this is easy enough to check, by contacting Experian (www.experian.co.uk), Equifax (www.equifax.co.uk) or Call Credit (www.callcredit.com). Each will send a copy of Ms Jackson's file for £2, or she can access her files via the Internet for about £10.

Mr Connolly says it is worth checking credit reports on a regular basis, as any fraudulent activity will show up quickly.

Mr Byles point out that the introduction of Chip and Pin technology by the banks should dramatically cut card fraud; it might pay Ms Jackson to ask for such a card immediately. She should also ask the credit reference agencies to note a "disassociation" with any issues on their files resulting from fraud.

Advisers' views are given for guidance only.

Arts and Entertainment
Sir Bruce Forsyth with Tess Daly in the BBC's Strictly Come Dancing Christmas Special
tvLouis Smith wins with 'Jingle Bells' quickstep on Strictly Come Dancing's Christmas Special
News
peopleIt seems you can't silence Katie Hopkins, even on Christmas Day...
Arts and Entertainment
Wolf (Nathan McMullen), Ian (Dan Starky), The Doctor (Peter Capaldi), Clara (Jenna Coleman), Santa Claus (Nick Frost) in the Doctor Who Christmas Special (BBC/Photographer: David Venni)
tvOur review of the Doctor Who Christmas Special
Arts and Entertainment
Left to right: Stanley Tucci, Sophie Grabol and Christopher Eccleston in ‘Fortitude’
tvSo Sky Atlantic arrived in Iceland to film their new and supposedly snow-bound series 'Fortitude'...
PROMOTED VIDEO
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Selby Jennings: Oil Operations

    Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

    The Jenrick Group: Night Shift Operations Manager

    £43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

    SThree: Trainee Recruitment Consultant - LONDON

    £20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

    Day In a Page

    Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

    'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

    Yazidi girls killing themselves to escape rape and imprisonment
    Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

    Ed Balls interview

    'If I think about the deficit when I'm playing the piano, it all goes wrong'
    He's behind you, dude!

    US stars in UK panto

    From David Hasselhoff to Jerry Hall
    Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

    Grace Dent's Christmas Quiz

    What are you – a festive curmudgeon or top of the tree?
    Nasa planning to build cloud cities in airships above Venus

    Nasa planning to build cloud cities in airships above Venus

    Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
    Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

    Clocks, rifles, swords, frogmen’s uniforms

    Surrounded by high-rise flats is a little house filled with Lebanon’s history
    Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

    Four months after the bombardment, Gaza’s wounds are yet to heal

    Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
    Gastric surgery: Is it really the answer to the UK's obesity epidemic?

    Is gastric surgery really the answer to the UK's obesity epidemic?

    Critics argue that it’s crazy to operate on healthy people just to stop them eating
    Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

    Homeless Veterans appeal: Christmas charity auction

    Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
    Pantomime rings the changes to welcome autistic theatre-goers

    Autism-friendly theatre

    Pantomime leads the pack in quest to welcome all
    The week Hollywood got scared and had to grow up a bit

    The week Hollywood got scared and had to grow up a bit

    Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
    From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

    Panto dames: before and after

    From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
    Thirties murder mystery novel is surprise runaway Christmas hit

    Thirties murder mystery novel is surprise runaway Christmas hit

    Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
    Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

    Anne-Marie Huby: 'Charities deserve the best'

    Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
    The botanist who hunts for giant trees at Kew Gardens

    The man who hunts giants

    A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there