Wealth Check: A writer in search of a happy ending
Each week we give 'Independent on Sunday' readers a financial makeover
Sunday 30 May 2004
Children's author Marcus Sedgwick is aware that writers can't rely on their books enjoying enduring popularity. So he's not giving up his day job and he's keen to ensure financial security.
Book royalties boosted his income last year and were put to good use as penalty-free overpayments on his home loan. "I really want to get this mortgage paid off; anything I can do to reduce my loan will be great,"
However, the money from his books could also feature in his long-term savings plans. "I see my writing as a pension but I don't know whether I'll be getting much in the way of royalties in years to come," he says.
"I think I've made a decent start to a pension scheme but, at 36, I might need to do more."
Although he has invested at least £55 a month into a Standard Life personal pension for the past 10 years, the contributions from a string of employers along the way have not been so regular. Uncertain about how much he has amassed so far in this pension pot - estimates hover around £7,500 - he is also disillusioned with its performance. "It worries me to see a statement telling me I'm going to retire on £3,000 a year."
He plans to join his employer's final salary pension scheme - for every 2 per cent he invests, the firm puts in 5 per cent - but he is unsure whether to transfer his existing pension over.
His home is his only investment. He has a £102,000 repay-ment mortgage with Northern Rock fixed until April 2006 at 4.79 per cent. He bought the property for £141,000 three years ago; it is now worth £200,000.
The £640 monthly mortgage payment includes life insurance and an element of critical illness and income protection. But he is not sure how much cover he actually has and wonders if he may have to review it.
Marcus has £750 in a Northern Rock mini cash individual savings account (ISA) paying 3 per cent interest, and the same amount in a Britannia instant access account paying 2.15 per cent. He also keeps £25,000 in "royalty cheques" in a Co-op business account, but the interest is "practically zero".
"I know it's a lot of money earning next to nothing in interest, but I keep it there to prepare for tax bills. I like the Co-op because of its ethical stance."
Interview by Sam Dunn
Marcus Sedgwick, 36, lives in Horsham, West Sussex.
Job: sales manager for publisher Walker Books and author of children's books including The Book of Dead Days.
Income: up to £60,000.
Savings: £25,000 in a Co-op business banking account; £1,500 split between accounts with Britannia and Northern Rock.
Investments: none, except his home.
Goal: to "get rid" of his mortgage and to fix a clear pension plan.
Marcus needs to factor his irregular royalty income into his financial future, so it would be wise to join his employer's scheme as soon as possible, says Darius McDermott at independent financial adviser (IFA) Chelsea Financial Services.
Marcus's money needs to work harder, says Jennifer Storrow of IFA Gee and Company; switching his £25,000 savings into an account paying a higher rate of interest would be a start.
His protection policies also need an urgent review to ensure he has adequate cover, advises Patrick Connolly of IFA John Scott & Partners.
Marcus may like the Co-op's ethical stance but he could earn much more interest, without sacrificing his principles, by going elsewhere. "The Ecology building society pays 3.05 per cent on a 60-day notice account," says Ms Storrow.
A "green" equity ISA could also encourage him to invest in the stock market, she adds. Typical funds include Isis Stewardship and Jupiter Ecology.
"[Equities] should be considered long-term investments and markets are slowly recovering," says Mr McDermott. A stocks and shares ISA "can help supplement a pension or even pay off a mortgage early". He recommends Liontrust First Income or Cazenove UK Growth & Income.
Marcus should also think about getting a better rate of return from his mini cash ISA, he adds. "Abbey National is offering one of the best no-notice rates at 4.6 per cent."
An emergency savings fund should be a staple in most people's personal finances, he advises, and Marcus should aim for a "rainy day" account of between three and six months' salary.
The overpayments that Marcus has already made on his mortgage represent "a very sensible approach", says Mr Connolly, and the £25,000 in the Co-op account could be put to better use in helping to reduce his home loan still further.
Switching to a flexible mortgage, he adds, would give Marcus more room for manoeuvre. "He could potentially use [these] savings to pay off some of his mortgage and then take the required amount back when his tax bill, or any other expenses, are due."
Ms Storrow is concerned that almost all his money is invested in property; she recommends a better balance by putting some savings in equities and bonds.
Marcus could be paying unnecessarily for Northern Rock's cover, says Mr Connolly. He should check if his employer already provides income protection and critical illness cover.
If Marcus intends to stay with his employer, he should increase the amount he contributes to his new final salary pension, says Ms Storrow.
But before he transfers any money from the Standard Life personal pension, he must consider many elements. These include his attitude to risk - particularly with regard to stock market investment; the projected value of his personal pension in years to come; the cost of any transfer penalties; and the possibility of "buying" extra years in the new scheme using the transferred Standard Life pot. Such a process is highly complicated and Marcus should take professional advice, says Mr Connolly.
If you would like a free financial makeover, write to Melanie Bien at The Independent on Sunday, Independent House, 191 Marsh Wall, London E14 9RS, or email email@example.com
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
Mark Dampier: An infrastructure fund that builds returns by taking different roads
Simon Read: Timeshare owners accuse Macdonald Resorts of land grab
Donald MacInnes: Let's pretend Scotland won and now a salmon is running the country
10 tips for taking out a personal loan
Bargain Hunter: Win a new iPhone 6
- 1 Mario Balotelli: Staff at arson-hit Manchester Dogs' Home convinced Liverpool striker is behind five-figure donation
- 2 Friends 20th anniversary: Alison Jackson photographs reunited cast
- 3 A bottle of wine a day is not bad for you and abstaining is worse than drinking, scientist claims
- 4 The response to my Pizza Express review has been overwhelming, and taught me a lot about journalism
- 5 Free U2 album: How the most generous giveaway in music history turned into a PR disaster
Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
Scottish independence referendum: A nation divided against itself
Scottish independence: David Cameron is becoming the 'George Bush of Britain'
Scottish referendum results: Cross-party consensus collapses amid Tory-Labour spat on the 'English question'
Russia freezes Ukraine into submission: Kiev admits country doesn't have enough fuel for winter
Scottish independence: The Queen breaks silence on referendum debate – as think tank warns of £14bn black hole if Scotland votes Yes
iJobs Money & Business
£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...
Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...
£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...
To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...
Day In a Page
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