pounds 500 a month. How can you invest it with a clear conscience?

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The Independent Online
Martin is 38 year old account director with a small clothing firm earning pounds 37,500 a year. He is married to Jenny, a 33-year-old deputy head teacher who earns pounds 28,000. They have one daughter, four year-old Rebecca, a pounds 90,000 endowment-backed mortgage taken out in 1987 and pounds 500 a month to invest. As practising Christians, they would like their money to have some social benefit and want to avoid investing in the tobacco, alcohol or arms industries. They do not want income until Rebecca is old enough to go to university when they will also want to prepare for retirement. Amanda Davidson advises.

Martin and Jenny must consider protection before investment. They have a four-year-old daughter who is likely to be dependent on them for the next 17 or 18 years. As practising Christians they can rest assured that there are some 30 funds from which they can choose. Some of their protection contracts can also be invested ethically.

There is now reasonable performance data with which to compare so-called "green'' funds. Had the couple invested ethically over the last five years the ethical funds' return is likely to have matched that of the "non-screened'' funds. However, there are good and bad performers in this field, as in any other.

Looking first at the mortgage, it is important for Martin and Jenny to keep their endowment policy in place. It has been going since1987 and assuming it is a with-profits policy it will have gathered some useful bonuses. Endowments are long-term contracts and can be transferred to the couple's next property. To cash an endowment early virtually guarantees a loss.

If Martin's firm has made no life assurance arrangements for him I would recommend a minimum of pounds 200,000 worth of cover over 20 years . By that time Rebecca is likely to be finished studying and hopefully have found a job. Assuming Martin is a non-smoker, Legal & General is cheaper than many and offers level-term assurance at pounds 46 per month. Many ethical investors prefer to invest with mutual rather than proprietorial companies. For clients with strong views in this area, Scottish Widows costs pounds 48 per month.

Jenny is likely to be in the teacher's superannuation scheme, where life assurance is likely to take the form of a lump sum plus income for Martin. But this is probably not sufficient. To insure Jenny for pounds 100,000 over 20 years would cost only pounds ll a month with Scottish Equitable if she is a non-smoker. Women are cheap to insure and this will provide a valuable addition to her death-in-service cover.

It is vital that Martin carry permanent health insurance. If his employer does not provide these benefits, a Zurich Life policy would cost him pounds 33 per month. This would provide a benefit of pounds 2,000 per month until he was 60 with benefit paid after six months. This policy will increase by the retail price index every year.

Martin could take out a critical illness policy to complement his health insurance. With Skandia Life, which does invest ethically, pounds 100,000 worth of critical illness cover would repay the mortgage and costs pounds 43 a month.

Martin and Jenny should not wait to sort out their pensions. By investing pounds 200 per month net of higher rate tax into Martin's pension, he can look forward to an income of just under pounds 9,000 per annum in real terms at age 60, as long as he increases his contributions as his income goes up. If he waits until he is 48, then his income at 60 will be under pounds 4,000 per annum.

Pensions are particularly suitable to higher rate taxpayers. Every contribution is offset against Martin's highest rate of tax. If the firm has no pension scheme then Martin is eligible for a personal pension plan. However it may be possible to invest the money in an executive pension plan funded by the company into which Martin can make contributions, This takes some of the pension burden from his shoulders. He should invest his pension fund with Friends Provident. They have the largest and oldest ethical fund. Over a 10-year period it has outperformed many of its non-ethical rivals.

Jenny should also look carefully at her pension. As a deputy head teacher she is presumably in a pension scheme. But she should not be complacent. It may be that she will not get full year's service by the time she retires. She should consider topping up with additional contributions. It may be more suitable to buy added years rather than invest in a free-standing arrangement.

Now we come to savings. The emphasis here has to be on providing Rebecca with funds at university. This is likely to be a testing time for parents as the grant system for students is being phased out. Even today, parents find themselves supporting their children to the tune of pounds 3,000-pounds 4,000 per year.

I would recommend pounds 100 into a personal equity plan, which grows free of tax and can be screened ethically. NPI, Scottish Equitable and HTR have good screening policies and sound financial management. Peps are particularly suitable for higher rate tax payers.

To balance out the equity base of a Pep (units fall as well as rise), a with-profits friendly society bond would be sensible. Any monies invested in a friendly society are tax-free. They must be held for 10 years or longer. They should also put pounds 50 per month into a building society. Finally, Martin and Jenny may wish to change their bank account to the Co-operative, which has made a stance of ensuring that customers' money is invested responsibly.

Amanda Davidson is a partner at Holden Meehan Independent, Independent Financial Advisers specialising in ethical investment

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