Pull the plug on your Liquid Gold account

Life is pretty tumultuous for Peter and Kathryn Robertshaw. Their first child is due in the next few days, their house is up for sale and Peter has recently left teaching to retrain as an NHS manager.

The patients

Peter Robertshaw, 30, and his wife, Kathryn, 29, from Langsett, near Sheffield

Jobs: Peter is an NHS trainee financial manager, Kathryn an NHS project manager

Joint income: normally £46,500 but Kathryn is currently on maternity leave

Savings: £4,500 in bank account

Investments: none

Goal: to survive financially after the birth of their first baby

The problem

Life is pretty tumultuous for Peter and Kathryn Robertshaw. Their first child is due in the next few days, their house is up for sale and Peter has recently left teaching to retrain as an NHS manager.

To cope with the upheaval, they want to be sure they have enough money put by.

"Our short-term financial goal is to survive the next few years while allowing Kathryn to take a full year off to care for our new baby," Peter says.

"We'd like Kathryn then to be able to return to work three days a week, and for us to be able to meet the childcare costs."

For the next two years, Peter will be on a salary of £18,500 until he qualifies; he should then receive a £10,000 pay rise. Kathryn, who also works for the NHS, is on maternity leave; she will benefit from three months on full pay, to be followed by three months on half pay. However, if she wishes to stay at home with her child for a further six months, she will have to take this as unpaid leave.

The Robertshaws have £4,500 in savings, held in a Halifax Liquid Gold account, a notorious low payer which returns just 0.95 per cent interest.

The couple, who live near Sheffield, have a £99,000 repayment mortgage fixed for five years with HSBC at 3.99 per cent. Their home is currently on the market for £165,000.

Their plan is to move to a smaller house and, in the process, bank up to £20,000 in cash to help pay their way through the leaner times.

Their mortgage repayments are backed by life insurance, including what Peter says is "some sort of income protection scheme" from HSBC. The policies cost a total of £50 a month.

As a teacher, Peter accrued a £12,500 pension pot over five years and has transferred it to the NHS scheme (he pays 6 per cent of his annual salary into this). Kathryn has paid the same proportion of her salary into the same NHS scheme for six years.

Longer term, the couple want to have sufficient savings to see their child through university.

Interview by Sam Dunn

The cure

The Robertshaws should withdraw their £4,500 from the Halifax account straight away, says Nick McBreen of independent financial adviser (IFA) Worldwide Financial Planning. The money should be put into a mini cash individual savings account (ISA) for tax-free growth.

They may have no investments but because their finances are so tight, every spare pound should be in cash deposits for instant access until Kathryn returns to work, advises Kevin Anderson of IFA Budge & Co.

Staying in their house and remortgaging could be a better idea than moving to a cheaper property, says Justin Modray of IFA Bestinvest.

Savings

Peter and Kathryn need to close their Halifax account, divide up the savings and deposit £2,250 each in a mini cash ISA. Abbey offers 5.35 per cent with instant access, says Mr McBreen.

Property

Downsizing will "certainly help to fund the income shortfall" and increase the couple's disposable income through lower mortgage payments, says Mr Modray.

"However, it could end up costing them several thousand pounds in estate agent's and legal fees, stamp duty and removal costs."

Mr Anderson warns that this could make moving a false economy: "I would dissuade the couple from selling - they should be able to live in the property and maximise their saving [into mini cash ISAs] over the next six months."

Mr Modray suggests Peter and Kathryn stay in their home, remortgage and release some equity.

They could borrow as much as £26,000 on their mortgage, "although repayments would rise by about £2,000 a year", he says. This may sound daunting, but some of the money borrowed could be used to cover the bigger mortgage, as well as providing extra funds until Peter qualifies in two years' time.

Pension

Both Peter and Kathryn are in sound final salary schemes and, rather than upping their contributions, should simply keep them at their present level, says Mr Anderson.

But Kathryn should note that working part-time and taking unpaid maternity leave will affect her pension when she retires. This is because her final salary will reflect lower pension payments made during her working life.

Mr Anderson adds: "In the longer term, Kathryn may wish to consider saving more for her pension by raising the amount she contributes"

Tax credits

With the birth of their baby, the couple should be entitled to the child tax credit, which will increase once Kathryn stops getting a full-time salary, Mr Anderson explains. She should also qualify for the working tax credit, says Mr McBreen, who warns: "The Robertshaws must not allow these benefits to disappear into the general expenses."

Protection

In the past few years, the life insurance market has become more competitive, drastically reducing the cost of cover. It shouldn't be necessary to pay more than £10 a month for £100,000 worth of protection, says Mr Modray, so the couple may want to review their current arrangements.

Both Peter and Kathryn are likely to qualify for NHS death-in-service benefits, paying a sum equal to twice their salary if either were to die, he adds.

Despite this, their income protection policy needs scrutiny, Mr McBreen says: "As members of the NHS pension scheme they should, in the event of sickness or accident, be entitled to six months' full salary followed by six months on half salary."

They may find they already have enough cover provided by their employer, and should make sure the HSBC plan isn't just duplicating this, he adds.

If you would like a financial makeover, write to Melanie Bien at The Independent on Sunday, Independent House, 191 Marsh Wall, London E14 9RS, or email m.bien@independent.co.uk

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Sales Executive / Foreign Exchange Dealer - OTE £40,000+

    £16000 - £40000 per annum: Recruitment Genius: A Foreign Exchange Dealer is re...

    SThree: Experienced Recruitment Consultant

    £20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

    Recruitment Genius: Collections Agent

    £14000 - £16000 per annum: Recruitment Genius: This company was established in...

    Day In a Page

    Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

    Cameron lowered the flag for the dead king of Saudi Arabia...

    But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
    Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

    Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

    Humanity must be at the heart of politics, says Jeremy Corbyn
    Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

    Joe Biden's 'tease tour'

    Could the US Vice-President be testing the water for a presidential run?
    Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

    Britain's 24-hour culture

    With the 'leisured society' a distant dream we're working longer and less regular hours than ever
    Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

    The addictive nature of Diplomacy

    Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
    Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

    Fashion: Ooh, Lady Chatterley!

    Take inspiration from DH Lawrence's racy tome with equally racy underwear
    8 best children's clocks

    Tick-tock: 8 best children's clocks

    Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
    Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

    Charlie Austin: ‘If the move is not right, I’m not going’

    After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
    Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

    How Isis profits from destruction of antiquities

    Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
    Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

    'If we lose touch we’ll end up with two decades of the Tories'

    In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
    Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

    The Arab Spring reversed

    Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
    King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

    Academic claims King Arthur was real - and reveals where he lived

    Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
    Who is Oliver Bonas and how has he captured middle-class hearts?

    Who is Oliver Bonas?

    It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
    Earth has 'lost more than half its trees' since humans first started cutting them down

    Axe-wielding Man fells half the world’s trees – leaving us just 422 each

    However, the number of trees may be eight times higher than previously thought
    60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

    60 years of Scalextric

    Model cars are now stuffed with as much tech as real ones