Wealth Check: Equities are the key to unlocking the door for long-term savers

Vicky and Chris Dyer are aiming to pay off their mortgage quickly and then concentrate on building up funds for their retirement

Vicky Dyer, 32, and her husband Chris, 38, from Dover, Kent, would like to pay off the mortgage on the family home as soon as possible, and also want to have enough saved up so they can retire comfortably.

In addition, they hope to be able to build up a nest egg for their two children: Matt, three, and Chloe, nine months.

Vicky is a self-employed travel agent and works from home.

"My pay varies quite a lot, and I've also been on maternity leave twice in the last four years," she says. "But I currently earn around £25,000."

Chris works as a police sergeant and has been in this job for 17 years. He currently earns £41,000.

The couple are set on saving hard now they are both working again.

"I have £2,500 in a cash individual savings account (Isa) with the Halifax but the rate has dropped to just 0.25 per cent," says Vicky.

"I also have £1,500 spread across two Halifax current accounts. Chris has around £12,000 in a stocks-and-shares Isa with Interactive Investor. He also has several 10-year savings policies with the Police Mutual."

Vicky and Chris have opened accounts for both their children with the Halifax.

"There is around £3,500 in Matthew's account and £600 in Chloe's," says Vicky.

The couple bought their four-bedroom, semi-detached house in Dover in February 2007 for £214,000.

"We then spent £20,000 in the first year renovating the property," says Vicky.

"We now have £78,000 left to pay on our mortgage with First Direct. This is an offset deal at 2 per cent above the base rate."

With an offset, savings are linked to the mortgage balance, and rather than earn interest on savings, the money is set against the outstanding mortgage.

As part of their arrangement, the couple have £11,000 in savings with First Direct. Their aim is to have paid off their mortgage in full within five to eight years. Having done this, they hope to save hard so that 10 years later they can either move to a bigger house, purchase a small, buy-to-let property, or buy abroad.

As Vicky is self-employed and receives no benefits from an employer, she pays around £200 a month into a personal pension with Friends Provident. Chris pays around £450 a month into the police pension scheme.

The couple have no debts, and while they do have Tesco credit cards to benefit from Clubcard points, they pay these off in full each month. They also frequently use Quidco to benefit from cashback when making purchases.

In terms of protection, Vicky pays around £33 per month for life insurance and critical illness cover, while Chris gets additional cover through the police.

"Our main focus is on clearing the mortgage and saving for retirement," says Vicky. "But we'd also like to be able to provide our children with financial help through university - or with a house deposit when the time comes."


Our panel of independent financial advisers commend Vicky and Chris for their approach to debt and for wanting to clear their mortgage as soon as possible; they also commend them for wanting to focus on their retirement planning. However, they urge them to consider equities rather than cash when it comes to savings. They also suggest they think carefully before entering into buy-to-let or purchasing a property abroad.

Build up separate savings pots

James Robson from Plutus Wealth Management recommends the couple put in place a more-structured savings plan, using separate "pots" for different aims over various time periods.

"As a first step they should maintain an emergency fund of three months' outgoings in cash," he says. "This is especially important given Vicky's self-employed status. I would hold this in an instant-access account. The second step would then involve them holding money in the offset account with the aim of reducing the balance on the mortgage."

As a third step, he suggests having a cash-based account for medium-term savings.

"After this, the couple should set up a pot for medium to longer-term savings," he says. "This can include Chris's investment Isa and other money the couple look to invest - rather than keep it in cash."

John Ditchfield from Barchester Green Investments agrees that when it comes to longer-term saving, a stock-and-shares Isa makes more sense.

"Cash Isas only pay a very modest level of return after inflation," he says. "Equities are more volatile, but Vicky can afford to take a long-term view."

Patrick Connolly from Chase de Vere adds that as the rate paid on the savings in the offset account is higher than that on other savings accounts, it is also sensible to use this facility as part of a wider plan.

Review children's savings

Vicky and Chris are doing the right thing by starting early and putting aside regular amounts for their children.

"But as they are likely to be investing over a period of between 10 and 15 years, they may be better off in stocks and shares, rather than cash," says Mr Ditchfield.

Mr Connolly adds that one of the best ways to save for children is through junior Isas, as this type of account is more tax-efficient.

Consider property options carefully

While investing in a buy-to-let can mean a regular income from rent, Mr Connolly warns property prices can fall as well as rise.

"This will be a real danger when interest rates start to rise and the mortgage payments become more expensive," he says. "There is also the risk of the property being void for prolonged periods. The risks of buying property abroad are even greater and I would be wary of doing this."

Mr Robson also urges caution: "A buy-to-let or holiday home will require a significant deposit of around 25 per cent - plus purchasing overseas can come with many additional expenses," he warns. "Moving to a larger family home would also incur costs, and as it is likely to mean buying somewhere bigger, this would move them into a higher stamp-duty band."

Continue with pension saving

Mr Ditchfield and Mr Connolly agree that the police pension is a good-quality, scheme and Chris should maximise its benefits.

Mr Robson adds that Vicky is doing the right thing by saving into a personal pension.

Keep an eye on investments

For most people, the best approach for long-term savings is a combination of pensions and Isas.

"Chris should review his investments to ensure they are suitable for him and performing as he expects," says Mr Connolly. "He should also review the 10-year savings policies and, in particular, look at the maturity values."

These types of policy invest in with-profit funds and often have high charges.

"They can also be inflexible and perform poorly," warns Mr Connolly. "The problem is there are often punitive exit penalties. Given this, the best course of action is usually to retain them until the end of the policy."

Ensure the family is protected

With two young children, protection needs are very important, according to Mr Robson.

"While Chris's protection arrangements are linked to his employment, Vicky should assess the level of cover she has in place to check this is sufficient," he says. "As she's self-employed, she could also consider the benefits offered by income protection. In addition, both Vicky and Chris should write wills."

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Selby Jennings: Oil Operations

    Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

    The Jenrick Group: Night Shift Operations Manager

    £43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

    SThree: Trainee Recruitment Consultant - LONDON

    £20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

    Day In a Page

    Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

    'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

    Yazidi girls killing themselves to escape rape and imprisonment
    Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

    Ed Balls interview

    'If I think about the deficit when I'm playing the piano, it all goes wrong'
    He's behind you, dude!

    US stars in UK panto

    From David Hasselhoff to Jerry Hall
    Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

    Grace Dent's Christmas Quiz

    What are you – a festive curmudgeon or top of the tree?
    Nasa planning to build cloud cities in airships above Venus

    Nasa planning to build cloud cities in airships above Venus

    Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
    Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

    Clocks, rifles, swords, frogmen’s uniforms

    Surrounded by high-rise flats is a little house filled with Lebanon’s history
    Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

    Four months after the bombardment, Gaza’s wounds are yet to heal

    Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
    Gastric surgery: Is it really the answer to the UK's obesity epidemic?

    Is gastric surgery really the answer to the UK's obesity epidemic?

    Critics argue that it’s crazy to operate on healthy people just to stop them eating
    Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

    Homeless Veterans appeal: Christmas charity auction

    Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
    Pantomime rings the changes to welcome autistic theatre-goers

    Autism-friendly theatre

    Pantomime leads the pack in quest to welcome all
    The week Hollywood got scared and had to grow up a bit

    The week Hollywood got scared and had to grow up a bit

    Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
    From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

    Panto dames: before and after

    From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
    Thirties murder mystery novel is surprise runaway Christmas hit

    Thirties murder mystery novel is surprise runaway Christmas hit

    Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
    Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

    Anne-Marie Huby: 'Charities deserve the best'

    Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
    The botanist who hunts for giant trees at Kew Gardens

    The man who hunts giants

    A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there