Wealth Check: 'Are we saving enough to retire in comfort?'

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The problem

The problem

Kay and Julian Batey would "give up work next week" if they could. But the couple, who have been married for more than two decades, know they still have plenty of work ahead of them.

"We would like to be financially independent when we retire," says Kay. "I'd like to do so at 63 - a good 20 years from now - but my husband wants to retire at 55, in seven years' time. However, we're not sure if we are doing enough to save."

They have been assiduous in their retirement saving so far and currently have two private pension schemes (in Julian's name). The first is with Skandia, where they have invested a combined £150 a month for the past 11 years; contributions from various employers have been sporadic, though. Their second scheme is with Royal Life (now Royal & SunAlliance), where they have put away £30 every month for 20 years.

Kay has a separate pension. Employer Kent Reliance has matched the £46 a month she has paid into its money purchase scheme for two years.

The Bateys also have £3,000 in a Kent Reliance building society mini cash individual savings account (ISA) paying 4.36 per cent interest, and £1,800 in a Yorkshire building society mini cash ISA earning 4.1 per cent.

Their mortgage is an outstanding £85,000 repayment loan on a property worth £180,000. The couple are on Portman building society's 5.95 per cent standard variable rate (SVR). They were on a 4.99 per cent two-year fixed rate, which ended in February, but decided not to fix again as they were on the point of moving home and didn't want to be tied down. Unfortunately, complications have led to delays in the property purchase and, as a result, they are having to make higher mortgage payments.

The Bateys don't have life insurance, critical illness cover or income protection.

Kay tries to clear the debt on her Egg credit card each month and always switches between 0 per cent introductory deals to keep interest payments down.

Interview by Sam Dunn

The patients

Kay, 42, and Julian Batey, 48, live in Chatham, Kent, with their sons Matthew, 19, and Liam, 17.

Job: Kay is a facilities supervisor at Kent Reliance building society, Julian a chef in London.

Income: £40,000 combined.

Savings/investments: £4,800 invested in two mini cash ISAs.

Goal: to be financially independent when they retire.

The cure

Getting life cover for their home should be the Bateys' priority, says Danny Cox of independent financial adviser (IFA) Hargreaves Lansdown.

With retirement in mind, Lisanne Mealing of IFA MDM Associates suggests they step up their pension payments.

David Holbrook of Hallmark-ifa says they should switch mortgage to a portable fixed deal so they can transfer it to their new property.

Retirement

On a projected investment return of 7 per cent per annum, the two private pensions will provide an income of up to £5,500 a year if Julian retires in seven years' time, says Ms Mealing. Kay should get £4,000 a year if she carries on working until 63.

While the couple are to be admired for their commitment to their pensions, Julian has little hope of retiring in seven years "unless Kay supports him or he wins the Lottery", says Mr Cox. "The level of contribution is probably nowhere near sufficient."

In the case of the Royal Life pension, he adds, the couple need to find out if it's a with- profits scheme and whether it has a guaranteed annuity rate. "If it hasn't got such a rate, it is probably a better use of money to divert those contributions to an alternative scheme such as a stakeholder."

Mr Holbrook says Kay should check if her employer will match any increase in her contributions to her occupational scheme.

Property

A portable fixed rate will help solve their mortgage problem, advises Mr Holbrook. The best two-year fix today is 5.19 per cent, says Mr Cox, and the best over five years is 5.69 per cent - both with Nationwide.

With their limited budget, a fixed rate is a good idea if interest rates continue to rise, as is widely predicted.

Protection

"As a bare minimum, their mortgage should be insured against death on a joint-life basis," says Mr Holbrook.

Ms Mealing says the Bateys would have to pay £32.79 a month for £85,000 worth of cover over 10 years.

But both should first check their employment contracts to see if death-in-service benefits already offer such cover.

Income protection and critical illness cover to safeguard their family's finances against loss of earnings are also worth considering, adds Mr Holbrook. Depending on their health, income protection will cost from £56.36 a month and produce a monthly income of £700.

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

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