Wealth Check: Cost of adopting without Madonna's millions
Saturday 04 November 2006
John Kenny, a secondary school teacher, and his wife Jane, a nursery nurse, plan to adopt at least one child in the next 12 months. The couple have a combined income of just under £43,000 a year and no debts other than a £112,000 mortgage.
They try to save £50 a month and have a cash ISA, in Jane's name, with about £1,500. But naturally, they are worried about how adopting will affect their finances. They need to know what sort of financial support they can expect from the state, especially if Jane has to take time out of work.
John has only been a full-time teacher since 2003 (he retrained after leaving the Catholic priesthood) and requires advice on his pension. He has to catch up on the years he lost. How much income should he use to buy back "teaching years" to enhance his final pension?
John and Jane also wonder whether they should continue to live in their house in Penge, and invest in it by extending. Or they could downsize to release some useful cash.
We asked for help from David Holmes, chief executive of The British Association for Adoption and Fostering (BAAF); Tom McPhail, of independent financial adviser Hargreaves Lansdown; and David Hollingworth of independent mortgage adviser London & Country.
Case notes: John and Jane Kenny, Penge, south-east London
Income: John, a teacher, earns £32,000 a year; Jane, a nursery nurse, earns £10,800.
Savings: £4,500 in Alliance & Leicester Premier Plus; joint current account with Alliance & Leicester with £1,000. Jane has £1,500 in an ISA.
Debts: Mortgage (Portman Building Society) of £112,000, taken out October 2005 for five years at 4.45 per cent.
Monthly outgoings: Just over £2,000 on living expenses.
All local authorities are required to provide a range of adoption support services, says David Holmes. However, entitlements are worked out on a case-by-case basis after assessment of needs and resources.
Each authority has its own means-testing system, but John and Jane will be entitled to an assessment. Adoption legislation sets out certain circumstances that create eligibility for consideration of financial help, but there is no automatic entitlement. Holmes says financial help can only be given so long as it does not duplicate any other tax or benefit to which the adoptive parents are entitled, and it is always means-tested (see www.direct.gov.uk).
However, John and Jane will be able to claim Child Benefit from the day the child comes to live with them. Paid adoption leave is available to either Jane or John if they adopt, Holmes adds. Jane should be able to take up to a year of adoption leave, though only nine months would be paid, and not at full salary.
John joined the Teacher's Pension Scheme when he was 43, so assuming a retirement age of 65 based on his current salary of £32,000, he can look towards a pension of £8,800 a year in today's terms and a lump sum of £26,400.
Tom McPhail says that, apart from buying back years in the scheme, to which John should devote as much resources as he reasonably can, he would not suggest any other pension investments. John should also look further into the denial by the Catholic priesthood to give him the funds they had put aside for him before he left; it could go against the Pension Acts of 1993, 1995 and 2004.
On savings, McPhail advises John and Jane to concentrate on building up spare savings in ISAs.
Property renovation would probably be the best option, says David Hollingworth. Downsizing might be a mistake given their plans for a larger family. Another option might be to rent the house out and raise the deposit for a new one against the existing one. This would mean a significantly higher mortgage borrowing across the two properties.
There is spare equity in John and Jane's property that could be released via a mortgage that will offer a cost-effective method of finance for redevelopment of their home. John and Jane should get quotes for extensions and factor in all other costs. If the mortgage looks affordable, this is a good option that avoids the costs of buying a new home.
For a free financial check-up, write to Wealth Check, 'The Independent', 191 Marsh Wall, London E14 9RS, or e-mail email@example.com
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
- 1 British tourists 'murdered' in Thailand: Pair's bloodied bodies found naked on Koh Tao beach
- 2 Vivienne Westwood says 'Yes' to Scottish Independence by declaring: 'I hate England'
- 3 Welcome to Cameroon, where drinking Baileys can lead to imprisonment
- 4 Lego breaks out of the toy box and heads for the gallery
- 5 Vogue under fire for 'Big Booty' article
Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
The political class is doing what Hitler couldn’t – destroying Britain
Scottish independence: Nationalist leader Jim Sillars threatens pro-union companies with 'day of reckoning' after independence
Scottish independence: Yes campaign feels the heat as Alex Salmond's NHS claims come under furious attack
£23m Birmingham cycle scheme is attacked by Tory councillor for not catering to the elderly
Salmond accused of laughing off national debt with ‘what are they going to do: invade?’ joke
iJobs Money & Business
£280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...
£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...
£35000 - £38000 per annum + Benefits: Ashdown Group: Training Coordinator / Pl...
Data Governance Manager (Solvency II) – Contract – Up to £450 daily rate, 6 month (may go Permanent)
£400 - £450 Per Day: Clearwater People Solutions Ltd: We are currently looking...
Day In a Page
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
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony