Personal finance: Plan to retire with an easy conscience
Saturday 24 January 1998
Status: Divorced, with two grown-up children, aged 24 and 26.
Occupation: Civil servant and nurse
The problem: Yvonne knows that if she is to get the best from her savings the time has come to put her personal finances under the microscope. Planning for a secure retirement is high on her list of priorities.
A qualified nurse, now working as a civil servant, Yvonne does have the benefit of a sizeable salary of pounds 40,000 a year, which means she can put aside a reasonable amount each month. Her fixed outgoings account for about half her net monthly income, in addition to which she needs to pay for the running of her car, as well as holidays, clothes and other social expenditure.
Last year she bought a new home for pounds 70,000 with a pounds 47,000 interest-only mortgage over 10 years from Bradford & Bingley. She was offered a discounted rate, 1.5 per cent below the standard variable rate for the first five years. She was advised to set up a personal equity plan (PEP) as a repayment vehicle for the loan and is presently putting pounds 287 a month into a Schroder UK Enterprise Unit Trust PEP. She also has a tax-exempt special savings account (Tessa) and a number of endowment policies.
Yvonne estimates she can salt away about pounds 500 a month to help build up her retirement nest-egg and, with a permanent contract of employment, she expects to be able to continue with this level of saving until she gives up work.
The adviser: Graham Bates of Bates & Partners, Capital House, 151, Otley Old Road, Leeds, LS16 6HN. Telephone: 0113-2955955.
The advice: The PEP fund she has selected concentrates on capital growth from investment in smaller and medium-sized companies. It has an excellent track record, and achieved a total return of 131.78 per cent over the five years to last November. It would make sense for her to increase her plan contribution up to pounds 500 a month, the maximum an individual can put into a PEP in each tax year.
Although PEP investments will no longer be available after April 1999, it will still be possible to put up to pounds 5,000 a year into an unit-linked Individual Savings Account (ISA) and her mortgage is less than the proposed lifetime limit of pounds 50,000 for investment in an ISA.
Yvonne does have several other investments already in place, including a second-generation Tessa with Nationwide. This is a secure investment and, although the return on capital is likely to be conservative, the tax concession is well worth having, bearing in mind Yvonne's status as a higher rate taxpayer.
She also has about pounds 2,000 in a Postal Account with Nationwide and a fixed-term bond, also for about pounds 2,000, due to mature next month. For everyday purposes she keeps a minimum balance of about pounds 200 in a current account with Midland Bank.
Some time ago Yvonne took out four separate endowment savings plans with the Royal National Pension Fund for Nurses, to which she contributes pounds 115 each month. One of these policies is due to mature in just over five years and is expected to realise about pounds 1,800. The other three mature just before her 60th birthday and show projected benefits of pounds 8,900.
She would like to keep a few thousand available for ready access in case the need arises to help out either of her two children. In fact, later this year she is expecting repayment of pounds 2,000 which she lent her daughter for a trip to New Zealand and one of her objectives is to invest this money for growth.
Although her primary objective is for capital growth now, she does feel that once she has retired it would be nice to benefit from some investment income to help top up her pension. In particular, she needs to know what to do with the pounds 4,000 in capital she will have when her daughter has repaid the loan and the Nationwide bond matures. And if she decides to top up her PEP to pounds 500 a month this will still leave pounds 213 available for regular savings.
She is happy to take a balanced risk approach but she has a strong interest in ethical matters and would not be comfortable investing in either individual companies or funds unless they could demonstrate an ethical approach.
Given the sums involved and the relatively short period until retirement, one sensible option would be to invest the pounds 4,000 in a low-risk with-profits bond, where it will not be exposed to the day-to-day volatility of the stock market but there is a good chance the capital will perform better than if it is left languishing in a deposit account. It will also be more tax-efficient as there is no personal liability to basic income tax and higher-rate taxpayers can take withdrawals of up to 5 per cent a year without triggering additional tax.
Friends Provident, a company well-known for its Quaker roots and ethical investments, has a with-profits fund worth looking at. The declared annual bonus is currently 6.5 per cent, in addition to which there is potential for a terminal bonus after five years. When looking for the right home for Yvonne's regular monthly savings, the Credit Suisse Fellowship Trust is a well-established ethical fund, which over 10 years has grown by 153.05 per cent.
Making sure she has adequate pension is also high on her list of priorities. Until six months ago she was a member of the NHS pension scheme but is now in the process of switching to the Principal Civil Service Pension Fund. This involves no penalties and means that Yvonne will have to contribute only 1.5 per cent of her annual salary instead of 6 per cent with the NHS scheme.
She does not have enough years of service left to get a maximum pension and, with this in mind, she has already started a free-standing additional voluntary contribution (FSAVC) plan with Friends Provident. Although she has been advised to make regular monthly payments to her FSAVC, she is likely to fare better by adding single contributions as and when spare cash is available.
Finally, Yvonne wonders if she should try to sell an endowment policy she took out with Scottish Amicable five years ago. Unfortunately, it is a 25-year policy and has not been in place long enough for this to be an option. The monthly payment of pounds 60 is not a problem and, since she would lose out by simply encashing the policy, the best course is to keep the plan going.
With everything considered she should end up with a good spread of investments helping to pay off her mortgage and providing a nest egg for a happy and comfortable retirement.
If you would like to be considered for a free financial makeover contact Andrew Verity at The Independent, 1, Canada Square, London E14 5DL, or e-mail email@example.com. Candidates should be willing to have their photograph published.
03 July 2015 08:30 PM
07 July 2015 12:10 AM
Unscrupulous crooks prey on older people to trick them out of their savings
03 July 2015 08:30 PM
Andrew Hagger reveals how to get the most from your plastic
03 July 2015 08:30 PM
One reader purchased the Post Office Travel Money Plus Card for a motoring holiday but discovered it can't be used at self-service petrol stations or autoroute toll booths
26 June 2015 10:30 PM
30 June 2015 05:56 PM
UK consumer groups complained that British holidaymakers face another two years of mobile phone misery before the law comes into effect
26 June 2015 10:30 PM
The P2P industry must do more to shake off an unjustified image of being too complex and risky for the everyday saver, says Andrew Hagger
26 June 2015 10:30 PM
Six of the energy company's customer have cause to blow a fuse this week
26 June 2015 10:30 PM
Derek's portfolio is currently suffering because of his failure to be more ruthless
25 June 2015 08:01 AM
One debtor was given a repayment plan that would have taken 125 years to repay
Challengers are smashing the traditional high street banks when it comes to offering decent savings rates
23 June 2015 11:46 AM
Ignore the new breed of savings institutions and you'll lose interest
NatWest pledged five years ago it wouldn't close the last bank in town. Now villagers have been told the branch shuts in September
23 June 2015 05:02 PM
When the last bank closes, local shops quickly go out of business
19 June 2015 10:00 PM
19 June 2015 10:00 PM
Questions of Cash: The paperwork wasn't right so I was left high and dry with a broken washing machine
19 June 2015 11:00 PM
A reader encountered a problem with a Currys washer/dryer care plan
The 'no-hang up' scam targets vulnerable people - and your bank may not protect you
Under new state pension rules we will all be much worse off
Budget 2015: George Osborne is set to get tough with further cuts in public spending
Energy giants overcharge us by almost £2bn as 70% of customers are on the wrong tariff, warns CMA
If a bank calls about transferring money because of fraud, you risk losing your life savings
- 1 Autistic teenager beaten up by bullies makes them watch 20-minute video about autism
- 2 Nick Kyrgios calls former Olympian Dawn Fraser a 'blatant racist' after she tells Wimbledon star to 'go back where their parents came from'
- 3 World learns of app that shows you who unfriended you on Facebook, app promptly crashes
- 4 Chris Moyles reportedly set to make radio comeback with new breakfast show on XFM
- 5 The Greece debt crisis explained in less than 100 words
More Britons believe that multiculturalism makes the country worse - not better, says poll
Osborne to cap family benefits at £23,000 – announced ahead of his post-election Budget
Nathan Collier: Montana man inspired by same-sex marriage ruling requests right to wed two wives
Forget little green men – aliens will look like humans, says Cambridge University evolution expert
Girl, 7, stares down hate preacher at Ohio festival with pro-LGBT rainbow flag gesture
Sickness and disability benefits could be reduced by £30 a week as part of £12bn welfare cuts
iJobs Money & Business
£40000 - £95000 per annum: Recruitment Genius: This is an exciting opportunity...
competitive: SThree: Are you passionate about sales?Do you have a keen interes...
£17000 - £30000 per annum: Recruitment Genius: This is an exciting opportunity...
£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...
Day In a Page
In a new collection of flats, this first-floor two-bedroom apartment offers ample entertaining space and a prime view of Furze Green from a private balcony.
This three-bedroom stone-built cottage currently trades as the village store with a restaurant in the annexe and family accommodation on the upper floors.
Previously two semi-detached properties, this five-bedroom home is spread over three floors with a large breakfast kitchen, orangery, office and gym on the second floor.
This five-bedroom home enjoys countryside views over the Blyth estuary to Southwold, offering flexible living space with a ground-floor annexe - ideal for use as a holiday let.
Close to the market town of Eye, this four-bedroom detached home offers a double-height living room which takes the place of the original, 19th-century, chapel nave.
Dating back to the 19th century, this four-bedroom home needs modernising. Spanning three storeys, the red-brick house has a fireplace, a small terrace and a cellar.
Just outside of Cambridge, this single-storey home offers three double bedrooms, a living room with vaulted timber ceiling and ladder steps that lead to a mezzanine study area.
This six-bedroom Georgian home is on three floors with open fireplaces, a two oven Aga, an annexe, and cottage gardens with outbuildings and a car barn.
A former coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, an attached office, kennels and an outbuilding that's currently used as a gym.
Located beside an impressive Victorian viaduct, this four-bedroom home has an open-plan living area that is glazed on two sides, with skylights and high ceilings.
A former furniture workshop, this three-bedroom home has high ceilings and painted brick walls, in a village setting only fifteen miles from the coast.
This five-bedroom stone townhouse features a pine staircase and an Inglenuk fireplace, double doors from the lounge give access to an enclosed courtyard.
This five-bedroom, detached home blends traditional and modern design; the sleek kitchen features a gas hob and oven set within an exposed chimney breast.
Moored in Chelsea's Cheyne Walk, this houseboat offers two double bedrooms and a teak deck that's ideal for al-fresco dining.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B or countryside retreat, subject to change of use permissions.
This Grade II-listed three-bedroom home is situated on a private road, just a short walk from the sandy beaches of Frinton-on-Sea.
Less than five miles from Malmesbury, this four-bedroom cottage comes with equestrian facilities and gardens that extend to approximately three acres.
Spanning three storeys, this late-Victorian five-bedroom farmhouse is a spacious family home with a modern interior and B&B potential.
With an original church arch, this triplex one-bedroom church conversion has a light, spacious, feel and comes with a secure off-street parking space.
This recently-refurbished three-bedroom home has bi-folding doors that lead out to a decked seating area - ideal for alfresco dining this summer.
Well-located for coastal walks and popular restaurants, this detached four-bedroom home offers views over farmland, to the Solent, the Purbecks and Bournemouth.
If you love high ceilings, school conversions like this one are bang on the money. This two-bedroom flat is minutes from Burgess Park and the foodie haven at Borough Market.
Set within a church conversion in Bermondsey, this two-bedroom maisonette combines existing features, such as original arches and brickwork, with a contemporary finish.
In the pretty market town of Bungay, this grade II-listed Mill House is arranged over four floors, offering four bedrooms and three reception areas.
This four-bedroom Edwardian home offers a combination of original features and contemporary design after a renovation by the current owners.
This four-bedroom home offers a vaulted ceiling in a breakfast room that's ideal for summer entertaining with doors that open to the patio and garden.
On the market for the first time in more than 50 years, this six-bedroom home is a project with vast potential - spread over three floors of living space.
This five-bedroom home comes with a range of outbuildings including a large barn which could be converted into a self-contained granny-flat or rental.
Surrounded by rolling countryside, this four-bedroom barn conversion comes with a self-contained, one-bedroom annexe that could serve as an office or a holiday let.
Located near Harrogate town centre, this five-bedroom Victorian terrace is arranged over three storeys while a current study serves as an optional sixth bedroom.
A ground-floor flat in a country house, located a mile from Sway; this two-bedroom home would make an ideal weekend retreat on the edge of the New Forest.
On a popular residential lane in Caterham on the Hill, this four-bedroom family home offers a secluded garden and a convenient location for local schools and public transport.
Just a short walk from Westerham green, this three-bedroom cottage has a light kitchen with exposed brickwork and double doors that lead to a south-facing garden.
In a prime spot opposite the River Thames, this one-bedroom flat has an 18sq ft reception room with glass doors that open out to a private terrace.
Set in the hills above Llanwrda Village, west Wales, this 18th-century three-bedroom farmhouse has holiday-let potential from a separate barn conversion and annexe.
This charming end-of-terrace townhouse is arranged over three floors, with two double bedrooms and a private courtyard garden located at the rear of the property.
Located in the University area, this semi-detached five-bedroom home is arranged over three floors - there's even a rear garden and off-road parking too.
Only a few minutes' drive from the charming town of Marlow, this two-bedroom home sits on the private riverside estate of Harleyford.
This detached four-bedroom home in Middleyard is arranged over two floors, with features that include a wood-burning stove and bespoke oak staircase.
In a row of eight detached Georgian residences, this five-bedroom home offers views of The Sound, Mount Edgcumbe and Cornwall from its impressive veranda and full-length balcony.
If you love cooking for friends this two-bedroom flat - complete with views of the iconic Battersea Power Station and an open-plan kitchen/dining area - will go down a treat.
Located above Grasmere village, this five-bedroom home is arranged over three floors and offers countryside views across Grasmere Lake towards Silver Howe.
This four-bedroom detached home comes with a double carport, useful workshop, garden and two walkways that offer views of the adjacent countryside.
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.