Wealth Check: 'I need a nest egg to return to Britain from Vietnam'

A British teacher and his partner have finally paid off student debts and want to come back to Britain. How can they put their plans into action?



The Patient

Simon Wilkinson has been living in Vietnam since August 2009. Having finally cleared all his debts, he is now keen to start saving, as he wants to build up a nest egg before leaving the country. The 34-year-old, who is head of English at a secondary school, lives in Ho Chi Minh City with his partner, Steve, 32, who works as a clinical psychologist.

Simon earns £32,000 a year, and Steve earns $72,000 (£45,000); the couple have been together for 13 years and entered into a civil partnership in 2006. "In London, we were both working extremely long hours and got tired of the cost of living," says Simon. "We decided that international expat living would be beneficial to our careers and quality of life."

However, Simon and Steve left university with combined debts of about £40,000, both having studied for long enough to get doctorates.

"I studied for eight years, including a BA in English and American studies, a PGCE [post-graduate certificate of education] and then a PhD, and accrued about £20,000 in student loans," says Simon. "Steve spent six years studying, and while he earned an NHS salary for the last three years of the doctoral training, a combination of travelling and helping me out with my PhD funding meant he also graduated with about £20,000 of debt in 2003."

The couple have worked hard to clear these debts – as well as their overdrafts and credit cards – and are finally getting into the position of having money to save and invest.

"Right now, it feels as though we are in a kind of financial limbo with zero debt and zero wealth," says Simon. "We both want the security of having some savings, and are just about in a position to save £2,000 a month until we leave Vietnam in 18 months' time. However, we know that with our love of travel and absence of other commitments we might not return home straight away, and could accidentally end up in Africa or somewhere else for a period."

They are renting out the two-bed flat they own in London. "We bought this in July 2007 for £322,500, and as this was just before the end of the lending boom, we got a mortgage of more than 100 per cent," says Simon. "This is a repayment deal with Northern Rock at 5.84 per cent which ends in December this year. The problem is that while the rental income is £1,100 a month, we have to send £750 back each month to cover some of the mortgage. This expense is making us question whether to sell."

The couple do hold £1,700 jointly in a Halifax share trader account, currently invested in several companies quoted on the Alternative Investment Market (AIM). Simon has six years of teachers' pension contributions from his time working in the UK, while Steve made contributions into an NHS pension for eight years; neither has any protection policies.

"As we are not contributing to pensions at the moment, we want to save not only for the short term to create peace of mind, but also want to invest for the longer term," says Simon. "We're also both keen to have a family at some stage, and want financial security should we decide to take the next step."



The Cure

Our panel of independent financial advisers (IFAs) agrees that while Simon and Steve are concerned about building up a nest egg, they cannot ignore the need to have short-term cash reserves. They also point out that while property is usually a good long-term investment, their property is a heavy burden, and may not become the asset they had hoped.



Property

Deciding whether or not to retain exposure to Britain's residential property market is not a simple matter, according to Robin Keyte from Towers of Taunton. "There have been many tales of people who have sold a nice house in the UK to move overseas, only to find they can't afford to return to a similar standard of property when they come home," he says. "However, it doesn't seem to make sense to rent out the flat and pay £750 a month in addition to the rental income when the property has little or no equity in it."

Mr Keyte suggests that Simon and Steve could reduce their outgoings by changing their mortgage deal to an interest-only basis.

"This could potentially save them about £600 a month, but the risk with this approach is that the mortgage never gets paid off," he says. "Ideally, you want the flat to provide a net return that exceeds inflation, and with the current outlook, I'm not sure that will be likely for a while. It would be entirely understandable if you decide to sell, but I would suggest selling only if the proceeds are enough to repay the mortgage in full."

Mike Pendergast from Zen Financial Services agrees that it may be worth waiting until the housing market improves. "Then at least you will make something on the property," he says. "You could also consider reviewing the monthly rental in the meantime, to see whether it's feasible for you to generate more income."



Cash reserves

Anna Sofat from Adidi says that Simon and Steve need to focus on building an emergency fund.

"As this fund needs to be easily accessible, cash savings are ideal," she says. "I would suggest one of their first priorities ought to be building up this emergency fund by slotting away, say, £1,000 each a month."

Mr Keyte agrees that without this fund, the couple's finances are vulnerable. "If you have any existing UK savings accounts, you can arrange for the payment of gross interest while you are non-resident," he says. "Otherwise, you may wish to approach your local branch of a bank such as HSBC to see what savings arrangements you can set up in Vietnam."

Mr Pendergast adds that if Simon and Steve are both still UK taxpayers, they can also maximise contributions into individual savings accounts (ISAs) while they are working abroad.



Investments

With an emergency fund in place, Simon and Steve can start looking at their investments.

"The only investments you currently hold are extremely high-risk shares in companies quoted on AIM," says Mr Keyte. "While AIM shares do have certain tax benefits, in practical terms, they are not much use to you at present, and I strongly advise against making further investments in these."

Instead, Mr Keyte suggests the couple make use of the existing Halifax online share dealing account and introduce money to buy investment trusts. "Investment trusts are plcs that invest in the shares of other companies and are useful collective investment vehicles," he says.



Pensions

Both Simon and Steve have made a decent start on their retirement planning by paying into good pension schemes while they worked in the UK, says Mr Pendergast.

"But as you are both no longer employed here, you will not be accruing benefits," he says. "If you are still UK taxpayers, you could look at making contributions into a UK-based personal pension or self-invested personal pension (Sipp), as you can still maximise contributions into these vehicles while working abroad."

Ms Sofat points out that while living out of the UK, you are still permitted to contribute a maximum of £3,600 per month into a pension scheme for up to five years.



Protection

As Simon and Steve don't have sufficient assets to meet their financial needs should one of them become ill, Ms Sofat suggests that, as a matter of priority, they take out income protection. "They could also consider life cover to provide a buffer for the survivor," she says.

Mr Pendergast adds that life cover will be even more important should they decide to have children, and urges Simon and Steve to draw up a will.

Have your say

Do you need a financial makeover? Write to Julian Knight at The Independent on Sunday, 2 Derry Street, London W8 5HF j.knight@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

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Payments Operations Assistant

    £23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

    Recruitment Genius: Telephone Debt Negotiator

    £13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

    Guru Careers: Communications Exec / PR Exec

    £25 - £30K: Guru Careers: We are seeking a highly-motivated and ambitious Comm...

    Guru Careers: Pricing Analyst

    £30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...

    Day In a Page

    On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

    On your feet!

    Spending half the day standing 'reduces risk of heart attacks and cancer'
    Liverpool close in on Milner signing

    Liverpool close in on Milner signing

    Reds baulk at Christian Benteke £32.5m release clause
    With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

    The big NHS question

    Why are there so few new GPs when so many want to study medicine?
    Big knickers are back: Thongs ain't what they used to be

    Thongs ain't what they used to be

    Big knickers are back
    Thurston Moore interview

    Thurston Moore interview

    On living in London, Sonic Youth and musical memoirs
    In full bloom

    In full bloom

    Floral print womenswear
    From leading man to Elephant Man, Bradley Cooper is terrific

    From leading man to Elephant Man

    Bradley Cooper is terrific
    In this the person to restore our trust in the banks?

    In this the person to restore our trust in the banks?

    Dame Colette Bowe - interview
    When do the creative juices dry up?

    When do the creative juices dry up?

    David Lodge thinks he knows
    The 'Cher moment' happening across fashion just now

    Fashion's Cher moment

    Ageing beauty will always be more classy than all that booty
    Thousands of teenage girls enduring debilitating illnesses after routine school cancer vaccination

    Health fears over school cancer jab

    Shock new Freedom of Information figures show how thousands of girls have suffered serious symptoms after routine HPV injection
    Fifa President Sepp Blatter warns his opponents: 'I forgive everyone, but I don't forget'

    'I forgive everyone, but I don't forget'

    Fifa president Sepp Blatter issues defiant warning to opponents
    Extreme summer temperatures will soon cause deaths of up to 1,700 more Britons a year, says government report

    Weather warning

    Extreme summer temperatures will soon cause deaths of up to 1,700 more Britons a year, says government report
    LSD: Speaking to volunteer users of the drug as trials get underway to see if it cures depression and addiction

    High hopes for LSD

    Meet the volunteer users helping to see if it cures depression and addiction
    German soldier who died fighting for UK in Battle of Waterloo should be removed from museum display and given dignified funeral, say historians

    Saving Private Brandt

    A Belgian museum's display of the skeleton of a soldier killed at Waterloo prompts calls for him to be given a dignified funeral