Wealth Check: Charity worker needs advice on pension and buy-to-let

Sam Parr has raised funds for Action Aid and managed a Barnardo's shop part-time. Now she has decided to devote herself to helping others full time. She left the Royal Mail in Sheffield, South Yorkshire, and now works for Shelter, the charity for homeless people. "I needed to be more people-centred rather than institution-centred," she says. "I wanted the sense of giving something back."

Sam Parr has raised funds for Action Aid and managed a Barnardo's shop part-time. Now she has decided to devote herself to helping others full time. She left the Royal Mail in Sheffield, South Yorkshire, and now works for Shelter, the charity for homeless people. "I needed to be more people-centred rather than institution-centred," she says. "I wanted the sense of giving something back."

Ms Parr, 37, is training to be an adviser for Shelterline, the charity's 24-hour phone line. "We give advice to people who have been evicted, people who need affordable housing and often people on the street," she says.

Her only pension provision is two years' contributions to the Royal Mail scheme. She intends to join the Shelter one. "I should probably be making additional voluntary contributions," she says.

"But when I read about how useless many pension schemes are I wonder if I should look at other options." Ms Parr bought a house two years ago for £46,500 and it is now worth £75,000. She is considering buy-to-let but fears the risk. She has a £36,500 mortgage with Stroud and Swindon building society and a £3,000 student loan. She drew £10,000 from her mortgage, using £4,000 to repay debt and earmarking £6,000 for home renovations. She wants to review her mortgage regularly and find the best savings account.

"I feel I could also save quite a bit by changing my car insurance, my house insurance and my mobile phone plan, among other things," she says.

We put Ms Parr's case to Alick Howard, of MDM Associates in Surrey, Paul Everitt, of Regent Cavendish in London, Richard Lishman, of Dickson Lishman Prince in Birmingham and David Holbrook, of Hallmark-ifa in York.

SAM PARR, 37, ADVISER FOR SHELTERLINE

Family: Single;

Education: BA in cultural studies; studying for MA in communication studies;

Car: Ford Fiesta;

Debts: £3,000 student loan; overdraft £650; store card £200; mortgage £36,500;

Savings: £6,000;

Salary: £22,500;

Pension: Two years in Royal Mail scheme;

Property: House in Sheffield worth £75,000;

Outgoings: (Per month): mortgage £209; car £35; electric/gas,£30; mobile phone £40; going out £200; council tax £60; credit cards £50; travel £45; work lunches £65; internet £16; insurance £30.

Solution 1: Pension

Mr Everitt says Ms Parr should consider a stakeholder pension and Norwich Union's is as good as any. She can contribute up to £3,600 a year and if she leaves Shelter she can still make contributions.

Mr Howard says Ms Parr should consider transferring the benefits of her Royal Mail pension into her Shelter scheme if the trustees allow, and if it offers similar benefits.

Mr Lishman says Ms Parr should consider buying AVCs. They offer a guarantee of the retirement income. Mr Holbrook says Ms Parr should look for more flexible ways of saving, such as an Isa.

Solution 2: Buy to Let

Ms Everitt says buy-to-let properties can be good investments, but only in the right location. Based on income and outgoings, Ms Parr would be taking a big risk in buy-to-let.

Mr Howard says that in buy-to-let, with a repayment mortgage of £100,000 over 25 years and an interest rate of 4.5 per cent, the repayments would be £555 a month.

Solution 3: Expenditure

To save on car insurance, Mr Howard says Ms Parr should use on-line websites that compare costs. Specialist insurers, such as Diamond, offer competitive rates for women. She should consider a pay-as-you-go mobile or contract from an independent dealer such as Carphone Warehouse.

Mr Lishman says Ms Parr should pay off her store cards because interest rates of 30 per cent are common. But she should keep her student loan as long as possible. Its rate is 3.1 per cent.

Mr Holbrook says Ms Parr should hunt moneyextra.com for cheaper car insurance and credit card deals.

Solution 4: Mortgage

Mr Everitt says Ms Parr should consider a fixed-rate mortgage, to budget more effectively. Alliance and Leicester offers a two-year fix at 3.79 per cent. This would bring her mortgage repayments to £190.41 a month.

Mr Howard warns Ms Parr may have redemption penalties to pay if she re-mortgages again now. She also needs to consider income protection, particularly vital if she buys a second property.

Mr Lishman says Ms Parr should consider letting out a room in her house and earn £4,250 a year extra, tax-free.