Seeking cash without commitment
FINANCIAL MAKEOVER; By sticking to PEPs and Tessas for now, the money will be much more accessible if Sabine decides to buy a flat or return to Germany
Sunday 29 June 1997
Sabine pays pounds 390 a month in rent, plus another pounds 27 in council tax. She spends a further pounds 600 a month.
Sabine has around pounds 3,500 in a 60-day notice account earning 4.75 per cent, plus a similar amount in German shares.
The company she works for has no pension scheme and she does not have a personal pension plan.
Sabine thinks that at her "ripe age" it is time to start saving for a pension. She also wants to know whether she can get a better return for the next six months or so on her pounds 3,500 in the bank.
What a financial adviser recommends:
Sabine is unclear how long she will remain in the UK: this will depend on how her personal life and career develop. She is certainly not planning to leave in the short term, however, and has looked at buying a flat.
For now she should probably stick to ways of saving that do not tie up her money to a great degree while at the same time offering attractive tax perks - PEPs and Tessas rather than pension plans.
A Tessa pays tax-free interest if the money put in is not touched for five years. But if necessary it can be cashed in before that time - in which case the interest becomes taxable.
PEPs are also tax-free and can be started with as little as pounds 50 a month. They can be cashed in at any time without penalty but, since they are basically stock market investments that may lose money in the short term, it is best to be prepared not to touch any of the money for at least five years. With the stock market at its present high, saving monthly also cuts out the risk of putting everything in just before a crash.
If her career in the UK develops into a longer-term commitment, Sabine could consider her pension options. Employer-based schemes are often a good deal if she should join a company that offers one in the future. Furthermore, rather than committing money to a personal pension plan now, she could use the proceeds from any Tessa or PEP to fund a plan at a later date.
Since she is earning and paying income tax on those earnings in the UK, any contributions Sabine made into a pension plan would qualify for tax relief - in effect giving her pounds 1 of investment for every 77p she put aside. If the proceeds from any Tessa or PEP were bigger than could qualify for upfront tax relief in any one year, there are rules to allow contributions to be treated as though they'd been made in previous years - enabling them to qualify for tax relief, assuming Sabine carries on working.
Sabine reckons she has pounds 200-pounds 250 a month to save. Some of this she needs for holidays, but she is happy with the idea of putting pounds 100 to pounds 150 a month aside for long-term saving - which is a reasonable sum that could eventually fund a healthy pension. However, by sticking to PEPs and Tessas for now, the money will be much more accessible should she decide to buy a flat or return to Germany.
Editor's note: Sabine could get around 1.5 per cent more interest on her cash and without tying it up to a greater degree. Sainsbury's Bank (0500 405060), for example, pays 6.15 per cent on its Instant Access account; money can be accessed by a Link cashpoint card or Bacs electronic transfer. The C&G (0800 717505) pays 6.5 per cent on its Instant account, which is operated by electronic transfer to a saver's own bank account so that money can in effect be accessed in two days. The Coventry building society (0345 665522) pays 6.35 per cent on its Postal 50 account, which is operated by post and has a 50-day notice period. And being one of the dwindling number of societies, the Coventry could yield a windfall at some stage in the future.
Extending the notice period to around six months will add little or nothing in terms of interest to these rates.
Sabine Stork was talking to Alistair Conway of the Conway Partnership, a south-west London-based independent financial adviser and a member of DBS, a leading network of IFAs. If you would like to be considered for a financial makeover for publication, write to Steve Lodge, personal finance editor, Independent on Sunday, 1 Canada Square, Canary Wharf, London E14 5DL. Fax: 0171 293 2096 or 2098; e-mail: firstname.lastname@example.org.UK. Please include details of your current financial situation, a daytime telephone number, and state why you think you need a makeover.
Last week's makeover recommendations were by David Lewis of EFS Financial Management, an IFA based in the Isle of Wight - not, as stated, the Isle of Man.
13 September 2014 12:00 AM
30 August 2014 12:00 AM
05 September 2014 11:30 PM
30 August 2014 12:00 AM
The UK has slipped to 11th in the latest European league table of savers. Rob Griffin checks out the best options
22 August 2014 10:30 PM
Caroline Flint, the shadow energy secretary, says a Labour government would create a new energy regulator
22 August 2014 10:30 PM
16 August 2014 12:00 AM
16 August 2014 12:00 AM
- 1 Rihanna 'nude pictures' claims emerge on 4Chan as hacking scandal continues
- 2 iOS 8 apps and features: eight iPhone settings you need to look at after you install the update
- 3 Kim Kardashian 'nude photos' leaked on 4chan weeks after Jennifer Lawrence scandal
- 4 'F*ck it, I quit': KTVA reporter Charlo Greene quits live on air in spectacular fashion
- 5 Scotland could still declare independence – even without referendum, says Alex Salmond
Scotland could still declare independence – even without referendum, says Alex Salmond
Scottish referendum results: Cross-party consensus collapses amid Tory-Labour spat on the 'English question'
Hilary Mantel 'should be investigated by police' over Margaret Thatcher assassination story, says Lord Bell
Scottish independence: David Cameron is becoming the 'George Bush of Britain'
Plebgate MP Andrew Mitchell called officer a 'little s**t', claim court documents 'exposing ex-Chief Whip's 'record of abusing police'
Archbishop of Canterbury admits doubts about existence of God
iJobs Money & Business
£65000 Per Annum Benefits + bonus: Clearwater People Solutions Ltd: If you are...
£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...
£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...
£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...
Day In a Page
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize