Chris and Rosie Inge have worked and saved hard over the past 30 years. However, the couple are not sure if they've done enough to give them a comfortable retirement, as planned in seven years' time. "While our finances look reasonably 'sorted', they would not support a life after work at [our] current rate of spend," says Rosie.
Chris's interest in personal finance began in his 20s and accounts for much of the couple's savings. They have £53,000 with ING Direct earning 4.89 per cent, and invest £75 a month into a friendly society plan. A portfolio of shares and equity ISAs managed by stockbroker Gerrard is worth around £112,000 and they have also put money into two enterprise initiative schemes (EIS) that back small businesses (£25,000 in the Troubadour Café in London and £7,500 in Brazz brasseries, located in the South-west).
The Inges have a further £12,000 in a range of unit and investment trust equity ISAs, including Polar Capital Technology, New Star Technology and Schroder Medical Discovery.
The couple have a £31,000 interest-only mortgage with Alliance & Leicester. Midway through a four-year discounted stepped deal, they currently pay 6.43 per cent. Their house is worth around £500,000.
Last year, they slimmed a mixed bag of pension pots into two Standard Life self-invested personal pensions (Sipps); both contribute £300 a month.
Insurance comes through a whole-of-life policy (with Skandia Life) and simple term assurance (Scottish Equitable). If one were to die, the surviving partner would receive £130,000.
Both have income protection plans with Norwich Union, one of which is paying Chris £870 a month after he contracted the MRSA superbug following a heart operation five years ago.
The Inges owe £1,200 on a First Direct personal loan, taken out to pay for double glazing.
As security for their business, they have a separate £40,000 Skandia investment plan.
The patients: Chris and Rosie Inge, 58 and 56.
Job: owners of Churton Inge, an advertising and marketing agency in Wells, Somerset.
Joint income: up to £50,000 a year.
Savings: £53,000 in a savings account; £75 a month put into a Family Assurance Friendly Society savings plan.
Investments: shares portfolio, equity ISAs, EIS projects.
Goal: to ensure their retirement plans are on track.
The cure: Their money must double
If the Inges want to retire on a similar income to the one they have now, they need all their savings and investments to double in value in the next seven years, says Gill Cardy of independent financial adviser (IFA) Professional Partnerships. This is a tall order and the couple should be more realistic, she adds.
Danny Cox of IFA Hargreaves Lansdown agrees but says the Inges have a lot of good investment funds. Both say the mortgage should be paid off now.
To retire on their current £3,200-a-month joint income, after tax, would mean turning their total financial pot (all investments, cash and pension) of £297,000 into an overall fund of £620,000, says Ms Cardy. Based on their current pension contributions of £600 a month, they would need their assets to grow by 9 per cent (after tax and charges) between now and Chris's 65th birthday - "a little unrealistic", she adds.
Given these figures, the Inges could consider the following options. "They could downgrade their income expectations. If they continue their present savings, then (after 5 per cent growth) they would have a fund of £480,000, which might generate an income of £2,400 a month."
Selling their house is another possibility. Trading down to a less expensive property would generate a lump sum of around £150,000, adds Ms Cardy.
The Inges must also get hold of a forecast of what their state pension will be, says Mr Cox. "As self-employed business people, their state pension entitlement will probably be lower than if they had been employed." The forecast, available using form BR19 online at www.dwp.org.uk, will detail how they could make further contributions.
If there is no specific need to keep the £53,000 in the ING Direct account, the Inges should use that money to pay off their home loan, says Mr Cox. "They are paying 6.45 per cent [on the loan] but receiving 4.5 per cent interest [on their savings] after tax."
Ms Cardy agrees - "even if there are redemption penalties. They should also pay off the remaining personal loan."
Mr Cox is unimpressed with the couple's choice of funds. "It's a bit of a mess. They have a collection of funds, not a portfolio. They need to decide what level of risk they are prepared to take and what they actually want."
The closer they get to retirement, the less risk they should take, he adds. "Equity income funds are a suitable choice, with the prospect of capital growth and a rising income over time." Worth looking at are Artemis, Invesco Perpetual Income and Jupiter.
With their shares and EIS stakes, Ms Cardy says the couple are sitting on "highly volatile investments. If it goes wrong, they will be worse off."
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