Wealth Check: £5,000 to save before the summer wedding
Sunday 12 February 2006
The problem: Can a couple put by enough, fast enough?
An August marriage is the top financial priority for Charlotte Hanson and Duncan Gurney, 33 and 31 respectively. "Our wedding is going to be very traditional and quite large," says Charlotte. "We've got 100 guests on the day and a further 60 for the evening reception."
The cost of the whole event, including a honeymoon in South Africa and Mauritius, is likely to push £16,000.
So far, Charlotte and Duncan, from Sunbury-on-Thames, Middlesex, have managed to save £5,000 in an HSBC Premier savings account paying 2.96 per cent.
They have had some financial help from their parents, but need to save at least £5,000 more before August.
Aside from the wedding, they want to know how best to provide for their future. Both work as consultants in the public affairs industry and have a combined income of £86,000.
While Charlotte has £26,000 in a Norwich Union personal pension plan, into which she pays £500 a month, Duncan is not yet putting money into his company's "defined contribution" pension scheme.
Charlotte has other retirement savings too: she contributed for one year to a Scottish Equitable personal pension, and for several years during a period of previous employment to the Hounslow local government scheme.
While saving for both the short and long term is at the forefront of their minds, the couple are also keen to pay off their debts.
Duncan has £2,600 left on a graduate loan with HSBC at 7.9 per cent and also owes £2,170 on a personal loan with Intelligent Finance at 8.9 per cent.
Charlotte pays £700 a month for a personal loan with Egg (at 6.7 per cent) taken out to buy a car. However, this will be paid off in April.
The couple bought a three-bedroom house for £195,000 in June 2004, and its value has since risen to £225,000.
They have a two-year fixed- rate mortgage on this property at 4.89 per cent with HSBC.
Charlotte and Duncan have £199,500 worth of life and critical illness cover with insurer Bright Grey.
The cure: After the big day, the big financial push
With their considerable disposable income, Charlotte and Duncan should easily be able to save enough to fund their wedding, says Colin Rothery from independent financial adviser (IFA) Throgmorton Financial Services. "But they need to make sure they are making the most of the best rates available."
Once their big day is over, they can start to plan for longer-term savings.
Switching their wedding savings from HSBC's Premier account - where, like all such accounts, tax must be paid - into a tax-free mini cash individual savings account (ISA) at a better interest rate will make their money work much harder for them, says Mr Rothery.
The Halifax, for example, is currently paying 5 per cent on its easy access cash ISA.
In April, Charlotte's car loan will be repaid, freeing up £700 a month. This should immediately be redirected to the savings fund, stresses Paul White of IFA Belgravia Insurance Consultants.
When the couple are married, it will be critical that they build up their savings again. With discipline, it shouldn't take them too long to amass the equivalent of six months' take-home pay, says Mr White.
At this point, they should consider switching some money into stock market investments such as stocks and shares ISAs. This will help them to pay for any long-term goals - perhaps university fees for their children.
Duncan should check to see if there are hefty redemption penalties on his outstanding personal loans, says Adrian Kidd of IFA Mint Financial Services. Most lenders now allow borrowers to repay their debt ahead of schedule, with a penalty of only one month's interest. A number charge no penalty at all for early redemption.
"If they're not too penal, consider transferring [these debts] to cheaper providers."
Northern Rock and Cahoot, for example, offer much lower interest charges, with annual percentage rates (APRs) of 5.8 and 5.6 respectively.
Duncan must take every care to check all the costs, though. Depending on when the loans were taken out, older and more expensive repayment rules may apply. If high penalties wipe out the cost of switching, it won't be worth it.
Once the wedding is paid for, Charlotte and Duncan can start to save for their future, says Mr Kidd. He recommends that Duncan start making "decent-sized contributions" into his company pension - "to make up for lost time".
As it has only a year's worth of contributions in it, Charlotte could consider transferring her Scottish Equitable personal pension pot to Norwich Union, adds Mr White.
"Otherwise, the plan charges may eat into the value of the fund," he warns. However, she should check the size of the "transfer fee" first.
Mr White recommends that she keep hold of her local government pension pot to take advantage of its generous benefits. He points out that it's a final salary scheme, where the employer takes on all investment risk.
Charlotte and Duncan must find time amid the wedding preparations to plan a remortgage deal in June, as they are approaching the end of their two-year fixed-rate period.
If they don't, they will slip on to their lender's standard variable rate and suffer an increase in monthly repayments at a time when they least need it, warns Mr White.
Another fixed-rate deal will help them to budget better.
As life insurance rates are very competitive at the moment, it could be worth the couple reviewing whether their premiums offer good value - depending on how long ago they bought their cover, says Mr Rothery.
But he urges a change of provider only if the new cover is at least as comprehensive.
Whenever switching life insurance, the golden rule is always to make sure that the policies overlap. Any gap in cover could leave you stranded.
If you would like a makeover, write to Sam Dunn at The Independent on Sunday, Independent House, 191 Marsh Wall, London E14 9RS, or email email@example.com
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