Wealth Check: 'How can I bring order to my savings?'
Each week we give 'Independent on Sunday' readers a financial makeover
Sunday 22 August 2004
Years spent ridding herself of student debt, clearing her overdraft and saving for a deposit on a house have taught Anita Quinney the importance of being organised financially.
But in recent months, she has become concerned that she may not have exerted such firm control in one very important area - her pension provision.
Anita has found herself with a mixed bag of pensions: a final salary scheme from her former teaching job; additional voluntary contributions (AVCs) with the insurer Prudential; and her company pension with her current employer, the P&O shipping line. She isn't sure what she should be doing with them all.
"I've heard so much bad news about pensions, and in particular the warning that the money you save will barely buy you a decent pension in the first place," she says.
She is thinking of transferring her £1,900 worth of Prudential AVCs to the P&O fund, but fears this might result in a penalty. She has also considered investing in a stocks and shares individual savings account (ISA) or in the buy-to-let housing market as alternatives to a traditional pension. She says, though, that she doesn't yet have enough capital to purchase a second property.
Anita has £8,000 in a mini cash ISA with Portman building society, which earns 4.5 per cent interest, and £600 in a savings account (also with the Portman) earning 1.05 per cent.
She has a two-bed terraced house in Southampton, valued at £150,000, and an £88,000 two-year discount repayment mortgage with the Portman, on which she currently pays 4.69 per cent interest.
With no dependants, Anita has no need for life cover. She has taken out a Portman Mortgage Care policy to meet her repayments if she is ill and can't work. She clears the balance on her HSBC credit card each month.
Interview by Sam Dunn
Anita Quinney, 32, from Ashurst Bridge, near Southampton. Job: staff manager at P&O. Income: up to £28,000. Savings: £8,000 in a mini cash ISA; £600 in a savings account. Investments: none. Goal: to get a grip on her pensions and earn a better return on her savings.
"There has been a bad press about pensions but it's not fair to tar all of them with the same brush - many offer good benefits," says Benjamin Gibbs of independent financial adviser (IFA) Glazers.
Meera Patel of IFA Hargreaves Lansdown agrees, while Nick McBreen from IFA Worldwide Financial Planning suggests that Anita look beyond the Portman building society to make her savings work harder.
As for purchasing a buy-to-let property, Mr McBreen feels she is right to be cautious. With so many others investing in this market, she may have missed the boat.
Talking through her pension contract with P&O's pension administrator would be a good first step, advises Mr Gibbs.
Anita can find out if her employer more than matches her own 5 per cent contributions and, if so, whether it would be possible to increase her own investment in the fund, Mr McBreen adds.
The Financial Services Authority has a website calculator that will let her compare how much she would like to retire on with what she will need to save each month to pay for this level of income ( www. pensioncalculator.org.uk).
Anita spent only three years in the teaching profession, but in that time "she will have built up a small but important pension in the teachers' superannuation scheme", says Mr Gibbs. Since this is an indexed (inflation-proof) scheme, it is best left alone until her retirement, Mr McBreen adds.
The extra contributions Anita makes to Prudential do need some examination, adds Ms Patel. She should find out what the fund invests in and what the transfer penalty would be if she were to switch the money she has saved to her current pot with P&O.
This information can be obtained by contacting Prudential, but once Anita has done this, she will need help from an IFA specialising in pensions. With professional advice, she can decide whether a transfer would be in her best interests.
Since Anita earns less than £30,000 a year, she could also invest in a stakeholder scheme. "She could contribute [up to] £234 a month [which will be topped up by the government], making £300 via tax relief," says Mr McBreen.
Anita's loyalty to Portman is misplaced. Better rates on cash ISAs are available from Abbey (5.35 per cent from 1 September), for example, says Mr Gibbs. But if she wants to move her cash, she mustn't withdraw it first or she'll be liable for tax. The new bank or building society should organise the transfer.
The interest on her Portman instant access savings account can be bettered too, adds Ms Patel. "Cahoot has an instant access internet account paying 5.5 per cent, and Sainsbury's Bank offers 5 per cent."
If she is prepared to leave her money untouched for 10 years, Anita could benefit from an equity ISA, says Mr McBreen. To reduce risk, she should adopt a "drip-feed" approach, making monthly payments. Investing a lump sum increases the chances of buying when the market is at its peak, and making big losses if it crashes soon afterwards.
"Anita could start by investing up to £3,000 in an equity ISA alongside her cash ISA," suggests Mr Gibbs. He likes Fidelity's MoneyBuilder Growth fund.
Ms Patel recommends Invesco Perpetual Income or Schroder UK Alpha Plus fund.
Anita has enough savings to tide her over for several months in the event of illness, our IFAs agree, but if she were to lose her job through injury or illness, she could be hit hard.
The Portman Mortgage Care policy covers repayments only for 12 months, Mr Gibbs warns.
Anita should check with her employer to see how long - and how much - sick pay will be available, Mr McBreen advises. If this isn't sufficient, income protection may be the answer, although it isn't cheap.
As she clears her credit card balance each month, the rate of interest Anita is charged is immaterial. Instead, she should see what she can earn by switching to a card with a cashback deal. Nationwide offers 1 per cent for six months before dropping to 0.5 per cent, Ms Patel says.
American Express Blue card pays 2 per cent cashback for three months (1 per cent thereafter) but is not as widely accepted as Nationwide's Visa card, Mr Gibbs adds.
If you would like a financial makeover, write to Melanie Bien at The Independent on Sunday, Independent House, 191 Marsh Wall, London E14 9RS, or email email@example.com
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
EastEnders Christmas specials are known for their shouty, over-the-top soap drama but tonight the show has done itself proud thanks to Danny Dyer.
Pension mortgages: 'The advice I was given was wrong and now I face losing my home'
You'll need £220,000 for a minimum wage in your retirement
Questions of Cash: I checked in with Air France in time and still missed the plane
Minister's pension promise to firefighters challenged
Bank-beating exchange rates on your international payments
- 1 Planes go hybrid-electric in important step to greener flight
- 5 Hip hop is both racial and political, and for Iggy Azalea to suggest otherwise is insulting
Nigel Farage defends Kerry Smith 'ch***y' comment: 'If you are going for a Chinese, what do you say you’re going for?'
British actor Idris Elba cannot star as James Bond because he is black, says shock jock Rush Limbaugh
Rozanne Duncan: Ukip expels councillor for 'jaw-dropping' comments made in BBC TV interview
Germany anti-Islam protests: 17,000 march on Dresden against 'Islamification of the West'
Ukip member gets into Christmas spirit with Union Flag plea to Santa 'for our country back'
Panic Saturday: 13 million Britons spend £1.2bn – while 13 million others across the country live in poverty unable to afford food
iJobs Money & Business
Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...
£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...
£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...
£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...
Day In a Page
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
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