The patient
Leaving a six-figure salary to work for a charity gave Mark Owen, 41, the quality of life he wanted. "I held a senior post in sales and marketing for an IT company," says Mark, who lives with his wife Paula, 39, a housewife, in Bristol. "But after my local office was closed, I found myself commuting to London every day."
He decided to swap his job for a charitable role so he could spend more time with his family following the birth of his daughter, Mia, four. "I also wanted to give something back to society rather than simply to shareholders," he adds.
It took two years to find the right role. Now he is managing director of HorseWorld (www.horseworld. org.uk), earning £60,000 a year. The charity helps hundreds of horses, ponies and donkeys that have suffered pain or neglect around the country.
"I knew this would mean a big change to my lifestyle, so I was well prepared for a 50 per cent salary cut," Mark explains. "I sold my Porsche and became more sensible with spending. We haven't really noticed the difference financially."
The couple have amassed some savings, with £6,000 in premium bonds, as well as £6,000 in shares spread across a range of technology companies. For Mia's benefit, they also have £400 in a child trust fund with Abbey, earning 4.5 per cent interest.
Nine years ago, they bought their four-bed house for £180,000. It has more than doubled in value to around £400,000 today.
They pay £360 a month for their interest-only 15-year £80,000 flexible fixed-rate mortgage. This is held with First Direct at a rate of 5.25 per cent.
"I offset all of my income against the mortgage and make regular overpayments," says Mark.
Aside from repaying the home loan and saving for their retirement, another financial concern is setting aside money to provide for Mia's future. "But I don't particularly want her to be privately educated – the local schools are really excellent," Mark explains.
For retirement needs, he pays 6 per cent of his salary into a company stakeholder pension scheme. For 18 years before this, he paid into various pension funds, including an occupational final salary scheme that is set to pay an annual retirement income of £4,088 and a lump sum of £5,784. He also has £25,877 in a group company pension plan with AXA and £56,000 in a similar plan with Standard Life.
On top of this, Mark has £68,000 of life cover with Phoenix, and death-in-service insurance of four times salary with Bupa.
The cure
"Mark's story is an example of a simple truth – that money does not buy happiness," says Anna Sofat from independent financial adviser (IFA) Addidi.
The family finances are sound despite the drop in income, though they need to assess their investments to give the greatest potential for growth in the long term.
Savings/investments
At present, Mark and Paula have some money in low-risk premium bonds, alongside high-risk shares in individual IT company shares – so more diversification is needed, our panel of advisers agree.
The average rate of return on premium bonds is 3.4 per cent tax-free. "More could almost certainly be made elsewhere," comments Raj Shah from IFA firm Simpli Independent.
He recommends that some of the money now held in premium bonds and shares be moved over to unit trust funds, wrapped in a tax-free individual savings account (ISA). This will give exposure to other asset classes and spread risk. For example, Mark could choose New Star's Managed Portfolio fund.
Switching from the cash child trust fund into a shares-based one will more than likely boost returns in the long run and could even help pay for Mia's university fees, if she decides to go on to higher education. Martin Bamford from IFA Informed Choice recommends the Children's Mutual child trust fund.
"When she reaches 18, she can move this money into an ISA in her own name."
Property
The fixed-rate mortgage gives the family stable monthly repayments, to help provide peace of mind.
And Mark is sensible to overpay when possible, as well as offset his salary. "He could get a projection from his lender on how much this will reduce his mortgage term," says Mr Shah. "That will help motivate him to continue paying off as much as possible."
Retirement
Mark has various pensions in place, but he needs more detail on these funds. Asking for projections from the schemes' trustees on the income that he can expect would be a start. "It will then be possible to calculate any likely shortfall he faces," says Mr Bamford.
He should contribute as much as possible to his company pension – as a higher-rate taxpayer, he benefits from the maximum available tax relief on these contributions.
To make it easier to monitor his retirement funds, adds Mr Bamford, "he could move his previous group personal pension funds into his new, low-charge company stakeholder – as long as there are no significant penalties for doing this".
The advisers agree that it is vital he keeps an eye on where his pensions are invested and whether the underlying funds suit his attitude to risk.
Protection
Mark already has enough life cover for the mortgage to be repaid if he died. But he needs to consider if it is the most suitable insurance for his family.
The advisers suggest replacing it with a family income benefit policy, to provide a monthly income rather than a lump sum in the event of Mark's death. Cover of £300 a month over a 15-year term can be bought for around £28 a month.
"It might be easier for his wife to manage than a lump sum that would need to be invested," says Mr Bamford.
Will
If he hasn't already done so, Mark should make it a priority to arrange a will, says Mr Shah. "If anything were to happen to him, this would mean his loved ones wouldn't have to go through a lengthy probate process."
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