Wealth Check: 'My pension is set to fall short when I retire'

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The Independent Online

Stephen Fitzgerald retired three years ago and expects his 62-year-old wife Linda will follow suit later this year. The couple are concerned about whether their retirement income will cover their outgoings once Linda stops work.

The good news is that Stephen has a modest company pension coming in on top of his state pension benefits. The couple also have savings and investments worth around £50,000, which they want to invest in order to boost their income.

On the downside, the couple still have a mortgage on their family home, which costs them £200 a month. And once Linda retires, her income will drop to around £320 a month. They're concerned the books won't balance.

The couple are also considering moving home at some stage over the next 18 months. They might release some equity in this way, but they would aim to pay off their mortgage and adjust their living expenses to suit their new circumstances. They also need to buy a new car.

We asked three independent financial advisers for their thoughts: Anna Bowes of AWD Chase de Vere, Ian Black of Black Financial Planning, and Keith Churchouse of Churchouse Financial Planning.

Case notes

Stephen Fitzgerald, 68, retired, Cheshire

Income: Annual company pension worth £8,800; state pension worth £5,280.

Monthly spending: Around £1,000 on living expenses, mortgage and other costs.

Property: Owns home with his wife but still paying a mortgage on the property.

Savings: Around £50,000 in shares, bonds, ISAs, endowments and premium bonds.

Debts: Credit-card bills cleared in full each month.


All the advisers point out that once Linda retires in November, the couple's income won't cover their outgoings, which means they'll have to dip into their savings. But Anna Bowes is relaxed about the situation. Once the couple repay their mortgage, they'll be £200 better off each month, she points out, plus their savings can be invested to produce more income.

Still, Bowes wants the Fitzgeralds to spend some time keeping a close check on their spending, identifying exactly where their cash is going. There may be opportunities for savings.


Keith Churchouse thinks Stephen has been prudent in setting aside £5,000 of his £50,000 in savings as an emergency deposit fund. He should leave this money where it is - though making sure it is earning a decent interest rate - while exploring ways to boost the couple's income with the rest of his savings.

Ian Black says a financial adviser would help him to draw up a well-diversified portfolio of investments that would generate a dependable income.

Churchouse also stresses the need for the couple to take professional investment advice, though he likes two income-producing funds in particular - Credit Suisse Corporate Bond Monthly Income and Norwich Monthly Income Plus 1 Income.

Bowes says investments could be switched into fixed-interest funds such as Artemis Strategic Bond or Invesco Perpetual Monthly Income Plus - if held with ISAs, this income would be tax-free income.

But she warns that the outlook for capital growth is very limited in this type of investment, so it would make sense to maintain some stock market investments. The aim would be to at least maintain the overall value of your investment portfolio in real terms.

Black has an additional idea. He thinks it would make sense for the Fitzgeralds to pay off their mortgage now, using some of their savings. Once they sell their home they'll be able to replace the capital spent on the loan. In the meantime, they'll save on interest costs and avoid the risk of rising interest rates.


Bowes wants the couple to review all their insurance policies to see whether the premiums can be reduced, or even if the insurance has become unnecessary. For example, if the mortgage is repaid, the couple's mortgage protection policy will be redundant.

Black applauds the couple for having an up-to-date will, but wonders whether they have considered the possibility of needing some form of long-term care when they are older. It may be worth exploring ways to prepare for this possible cost.

Finally, Churchouse points out that Stephen and Linda live relatively close to a university. They could rent a room out to a student for up to £354 a month with no tax liability. If they don't want to move, this would more cover their monthly mortgage repayment and provide an additional income. This way, they could even avoid selling their house completely, with all the costs that a move would incur.

For a free financial check-up, write to Wealth Check, 'The Independent', 191 Marsh Wall, London E14 9RS, or e-mail cash@ independent.co.uk

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