Wealth Check: 'I have no credit history in this country'
Saturday 24 April 2010
Alexandra Marr, 30, has just returned to the UK after working abroad for seven years as a marketing and public relations consultant. "I've been lucky enough to hit the ground running and have found a lot of work due to my extensive experience in the US and Canada," she says. "But I have no credit history in Britain, so it has been difficult to think of long-term financial goals. My excellent credit scoring in the US and from seven years ago in the UK counts for nothing. I've just had to pay four months' rent up-front and I am having problems applying for all sorts of accounts. I have about $50,000 in savings but it is earning just 0.02 per cent, so I am desperate to at least put some of these savings to work."
Annual income: £30,000 estimated
Rent and bills: £650 a month
Car expenses: £200 a month
Living expenses: £400 a month
Holidays: £2,000 a year
Savings: $50,000 in a US account plus £4,500 in an online account
Offering advice this week are Aj Somal, of Uniec Financial Solutions, Christopher Wicks, of Bridgewater Financial Services, and Darius McDermott, of Chelsea Financial Services...
"The most pressing thing is to get Alexandra in a position where she can get credit," says Wicks. "But two issues make this difficult. First is her absence from the UK and second is her new start-up, self-employed status." He suggests finding out if her US bank has a branch in the UK as they may grant a sterling account on the basis of her US credit history."
Failing that, Alexandra should open a British deposit account. "Once you have held the account for a while, say a year, apply for a conventional current account," says Wicks. "By that stage, you should have a record of paying rent and utilities on time and should be capable of obtaining credit."
Alexandra hopes to raise a deposit for buying a home. The advisers agree she should transfer the money held in a dollar account to a British account. "She should think about preservation of her savings, not accumulation," says McDermott. "She should look for the best instant-access cash Isa to park a proportion of her savings in, to provide for projects such as buying a car. Currently, Santander is offering the most competitive cash Isa with a rate of 3.5 per cent."
"The £4,500 in an online savings account could be used as an emergency fund, if it is readily accessible," adds Somal. "But Alexandra should check the rate she is earning and move the money if it's poor."
"I saw a bank adviser and he suggested I put as much into a pension as possible. But I'm weary of the state of the world at the moment and worried about tying myself down for 25 years," says Alexandra.
McDermott says: "Such fears should not preclude pension investing. No other investment wrapper offers similar tax benefits; your investment is locked away until retirement."
But Alexandra should wait until she has a clearer idea about her income, says Somal. "She should consider starting a regular contribution into a personal pension plan, but as she has only recently set up her business, it is worth reviewing this area when she has been trading for a year, and will have a better idea about her earning levels and the amount of disposable income she can set aside."
"The only other issue is how Alexandra would support herself if she was unable to work due to ill-health or injury," says Wicks. "She could take out an insurance which provides a replacement tax-free income payable in the event she is unable to work for say six months or more, until she either gets better or reaches retirement age."
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