Wealth Check: 'How can I juggle saving for a pension and buying a house?'

Aileen Mc-Greevy, 22, is employed as an architectural assistant. She lives in a rented property in Stranmillis, Belfast.

As she is coming to the end of her degree, she is keen to receive some advice about savings and pension schemes.

"I want to know when I should start saving for a pension, how much I should be saving annually, and how much I should aim to have saved by retirement," says Aileen.

Besides graduating and getting a full-time job, Aileen is also keen to get onto the property ladder and ensure that she can retire debt-free by her 60th birthday. "By the age of 26, I want to own my first house. By my early 30s I want to have moved to my permanent home, which will be a larger house suitable for a family. By the age of 50 I would ideally aim to have most, if not all, of my mortgage paid off and I want to have retired by the age of 60 with no debts," she says.

Case notes

Income: £13,000 per year
Monthly outgoings: £175 tax and National Insurance contributions, £400 living expenses
Debt: none
Savings: ISAs worth £2,000

Advice this week is given by Christopher Wicks of N-Trust, Philip Pearson of P&P Invest and Ray Prince of Rutherford Wilkinson...


The experts agree that Aileen should begin to invest now in some form of pension scheme if she is to realistically achieve her goal of retiring at 60.

"A simple straightforward way to start saving for retirement is through the use of a stakeholder pension. It is designed to provide a low-cost way of building up a pension pot. There is no initial charge to invest, with the maximum charge capped at 1.5 per cent, per year for running the plan," says Pearson.

He recommends Aileen embrace stock market risk as, over the long term, it is likely to provide the best prospect of achieving inflation-beating growth. He says the most straightforward way for her to achieve this within a stakeholder pension is to choose a tracker – a fund that follows the performance of the UK stock market.

Once the pension has built up in value to a few thousand pounds she should then consider using alternative funds to compliment it in order to reduce risk by diversifying into different areas.

"If Aileen were to save £200 per month from now until age 55, and then leave the fund until age 60, she could expect to generate an income of £4,800 a year in today's money, after tax. If Aileen invests 5 per cent of her income now, then approximately £65 per month would be invested. If her company matches that, the amount will double," explains Prince.

However, to achieve her primary goal of retiring by the age of 60, Aileen may need to save more, according to Wicks. "The amount of money you need to save into a pension depends on a number of factors. One of the most important is the timing and likelihood of receiving any inheritance.

"If the inheritance is ignored, I have estimated, assuming a 3 per cent per annum real return (that is, excluding inflation), that you would need a fund in today's terms of around £440,000 at age 55. This would require contributions of about £689 per month gross. If you put retirement back by five years, you would need to contribute around £545 per month," he explains.


To ensure she is saving sensibly, the advisers agree that Aileen should review her expenditure and draw up a budget and make a contingency for regular monthly saving.

"If you find it difficult to understand exactly where your money goes, it is helpful to keep a diary of every penny you spend each day over the course of a month.

"A budget for regular monthly saving needs to be created with the capital from your wage at the beginning of the month before you start spending," says Pearson.


Prince believes that Aileen should speak to some local estate agents to get a feel of the price-trends in her area, which will also give her the chance to learn how the local housing market operates.

"Aileen will need to see if she qualifies for a mortgage. Since the contraction in the credit markets, getting a mortgage has become more difficult. The challenge she faces is getting the deposit together. As she has no debts, the Nationwide would offer a loan of £82,000 based on an annual income of £20,000, or £102,000 based on £25,000. But she would need a 20 per cent deposit to qualify. There are lenders that will consider a smaller deposit."

He advises her to talk to a mortgage specialist.

For a free financial check-up, write to Wealth Check, The Independent, 2 Derry Street, London, W8 5HF; or email wealthcheck@independent.co.uk

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Life and Style
love + sex A new study has revealed the average size - but does that leave men outside the 'normal' range being thought of as 'abnormal'?
Arts and Entertainment
The Palace of Westminster is falling down, according to John Bercow
voices..says Matthew Norman
Steve Bruce and Gus Poyet clash
Graham Norton said Irish broadcaster RTE’s decision to settle was ‘moronic’
Arts and Entertainment
Jake and Dinos Chapman were motivated by revenge to make 'Bring me the Head of Franco Toselli! '
arts + ents Shapero Modern Gallery to show explicit Chapman Brothers film
Arts and Entertainment
Kurt Cobain performing for 'MTV Unplugged' in New York, shortly before his death
music Brett Morgen's 'Cobain: Montage of Heck' debunks many of the myths surrounding the enigmatic singer
Life and Style
Brendan Rodgers
football The Liverpool manager will be the first option after Pep Guardiola
Amazon misled consumers about subscription fees, the ASA has ruled
Arts and Entertainment
Myanna Buring, Julian Rhind-Tutt and Russell Tovey in 'Banished'
TV Jimmy McGovern tackles 18th-century crime and punishment
Arts and Entertainment
Paul Whitehouse as Herbert
arts + ents
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

    Recruitment Genius: Sales Executive - OTE £40,000

    £15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

    Austen Lloyd: Law Costs HOD - Southampton

    £50000 - £60000 per annum + Excellent Salary: Austen Lloyd: An outstanding new...

    SThree: Recruitment Resourcer

    £20000 - £21000 per annum + uncapped commission: SThree: As a graduate you are...

    Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

    £25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

    Day In a Page

    Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

    Climate change key in Syrian conflict

    And it will trigger more war in future
    How I outwitted the Gestapo

    How I outwitted the Gestapo

    My life as a Jew in wartime Berlin
    The nation's favourite animal revealed

    The nation's favourite animal revealed

    Women like cuddly creatures whilst men like creepy-crawlies
    Is this the way to get young people to vote?

    Getting young people to vote

    From #VOTESELFISH to Bite the Ballot
    Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

    Poldark star Heida Reed

    'I don't think a single bodice gets ripped'
    The difference between America and Israel? There isn’t one

    The difference between America and Israel? There isn’t one

    Netanyahu knows he can get away with anything in America, says Robert Fisk
    Families clubbing together to build their own affordable accommodation

    Do It Yourself approach to securing a new house

    Community land trusts marking a new trend for taking the initiative away from developers
    Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

    David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

    The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
    Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

    Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

    Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
    With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

    Money, corruption and drugs

    The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
    America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

    150 years after it was outlawed...

    ... America's first slavery museum is established in Louisiana
    Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

    Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

    The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
    Tony Oursler on exploring our uneasy relationship with technology with his new show

    You won't believe your eyes

    Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
    Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

    Moores must go. He should never have been brought back to fail again

    The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
    War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

    The battle for Mosul will unleash 'a million refugees'

    Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn