Wealth Check: 'How can we save when we want to get married too?

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The Independent Online

John Wood and Jo Elliss got engaged three weeks ago and plan to marry next year. But they are concerned about the financial hurdles ahead. "It's such a period of change for us and we've got no idea where to start," Mr Wood says. "Neither of us are renowned for our financial nous."

Mr Wood, 30, is a new media officer for the Trades Union Congress and runs worksmart.org.uk, the TUC's employment law advice portal. "We draw on the experience of the TUC to help people," he says, "but anyone can use it." Ms Elliss, also 30, teaches at Durand primary school in Stockwell, south London. She qualified as a teacher two years ago and is, so far, enjoying her job.

They met four years ago while working for a charity in Oxford and they moved to London last year. They rent a flat in Stockwell for £850 per month, close to Ms Elliss's school. Mr Wood's offices are slightly further away, on Tottenham Court Road in central London.

They are gradually adjusting to living in London, although Mr Wood says: "We spent a lot on making the most of the capital - going out to the theatre, eating out etc. We've had to cut back a lot to start saving."

The couple would like to buy a house, but feel priced out of the market. "Our main worry is whether we will be able to afford a mortgage," Mr Wood says. "Should we wait for house prices to fall or buy as early as we can?" They are keen to stay in south London, although somewhere "slightly more suburban and leafy" than Stockwell.

They have £5,000 in savings for a deposit on a house, held in an Isa, but no other investments. Happily, they are both members of their employers' final-salary pension schemes.

Their only debts are £2,000 on a credit card and Ms Elliss's student loan. This £6,200 loan is split into two chunks: one being paid off at £50 a month and the other at £90. She can defer the second chunk.

When their big day comes, Ms Elliss and Mr Wood want to be as financially prepared as possible. As Mr Wood says: "We need to find out whether getting married will have good or bad implications for our finances."

We asked Darryll Connor, of Towry Law; Nicky Ayriss, of Alexander Price ; Elliot Nathan, of The MarketPlace; and Fiona Price, of Fiona Price & Partners.


Status: Engaged;

Occupation: Mr Wood is a TUC media officer; Ms Elliss is a teacher;

Education: Mr Wood has a BA in politics and German; Ms Elliss has an MSc in development studies and a PGCE;

Debts: £2,000 on a credit card; £500 overdraft; Ms Elliss has a £6,200 student loan;

Salary: Mr Wood £30,800; Ms Elliss £24,500;

Savings: £5,000 in Isa;

Pension: Both in employers' schemes;

Shares: None;

Property: £850 per month rented flat;

Outgoings (per month): council tax £90; mobiles £60; utilities £60; travel £100; union subs £20.

Solution 1: Marriage

Mr Connor says marriage used to entitle you to financial benefits from the Inland Revenue in the form of married couples' income tax allowance. This has been scrapped by the Government, but married couples still benefit from certain exemptions in that they can transfer assets, such as stocks and shares, between each other without any immediate capital gains tax.

In terms of pensions, many employers will only pay one to a legal widow or widower, although others will recognise partners (normally defined as couples who are resident at the same address) who have cohabited for a year and are financially inter-dependent.

Ms Ayriss says they must budget for the actual cost of the wedding itself. If they want an expensive celebration, it will have to be paid for. They have to decide if they want to take out a personal loan, or whether their respective families will be prepared to assist them. But a personal loan will have a knock-on effect for their ability to borrow for a mortgage and also their monthly cash flow.

Ms Price says they should weigh up the cost of marriage and even the cost of divorce against the tax advantages of marrying. At least a third of marriages now end in divorce and this can be expensive, as well as emotionally painful.

Solution 2: Student loan

Ms Price says student loans tend to have a low rate of interest. As Mr Wood and Ms Elliss are saving to buy their first home, she suggests they keep the payments as low as possible so they can save the maximum towards their deposit.

Mr Connor says it is a good idea for Ms Elliss to reduce her student loans so she can concentrate on clearing their most expensive debts first, starting with the £500 overdraft. Banks normally levy a fixed fee as well as interest on overdraft debt, although this does vary depending on the lender.

Solution 3: Savings and pension

Mr Nathan says it is excellent that both Ms Elliss and Mr Wood are paying into final- salary pension schemes. These are the most desirable types of pensions. He suggests they should review their pension status regularly to see whether they need to increase their contributions.

Ms Price says the couple should ensure their £5,000 Isa savings are with a competitive provider. They should be looking for a rate of about 4 to 4.4 per cent a year. Internet accounts usually pay the best rates and if they feel comfortable with this, they should open an internet-based savings account or a mini cash Isa.

Ms Ayriss says Mr Wood should consider amalgamating the proceeds from his former occupational pension schemes into his TUC pension.

Solution 4: Mortage

Mr Connor says mortgages are at their lowest level for nearly 50 years, but interest rates are expected to rise over the medium term. He thinks a decent hedge against this would be for them to take a capped or fixed-rate mortgage. Repayment mortgages are very secure, in that they will know that after a set period the mortgage will be redeemed.

Ms Price says it is important that the couple build up a sufficient deposit and give themselves enough time to find the right property. Buying a house will be the biggest financial decision they make. They should consider their protection needs, such as life and sickness cover. As public sector workers, they should have a decent level of sickness benefit, but they should clarify this and see if there are any gaps.

Ms Ayriss thinks the couple should go for a three to five- year fixed-rate mortgage, which will give them stability in the early years of the mortgage and also, if Ms Elliss leaves work to have a child, it will help them with their expenditure.

But they should wait rather than buy a property now, since they have limited resources saved towards the deposit and nothing set aside for fees and other costs. While mortgage rates remain low, and as long as demand continues, the price of houses in their area will not drop drastically, but they should wait to ensure they can save up a reasonable deposit.

Mr Nathan thinks they should buy as soon as they can. He stresses, however, that they should view their property as a home, rather than as an investment, and they must take a long-term view. History shows that property has delivered good returns over time, but if they need to move within two or three years they could be in a position of having to sell during a downturn.

If you would like to be given a financial health check-up, write to: Wealth Check, 'The Independent', 191 Marsh Wall, London E14 9RS, or e-mail cash@independent.co.uk.

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