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

Compare with the Independent: See how much you could save by switching credit cards. Compare now

Sport
Raheem Sterling and Luis Suarez celebrate during Liverpool's game with Norwich
sport Another hurdle is out of the way for Brendan Rodgers' side
Arts & Entertainment
The original design with Charles' face clearly visible, which is on display around the capital
arts + ents The ad shows Prince Charles attired for his coronation in a crown and fur mantle with his mouth covered by a criss-cross of white duct tape
Sport
Steven Gerrard had to be talked into adopting a deeper role by his manager, Brendan Rodgers
sport LIVEFollow the latest news and scores from today's Premier League as Liverpool make a blistering start against Norwich
News
People White House officials refuse to make comment on 275,000 signatures that want Justin Bieber's US visa revoked
VIDEO
News
Sir Cliff Richard is to release his hundredth album at age 72
PEOPLESir Cliff Richard has used a candid appearance on an Australian talk show to address long-running speculation about his sexuality

Sport
Mourinho lost his temper as well as the match
sportLiverpool handed title boost as Sunderland smash manager’s 77-game home league run
News
The speeding train nearly hit this US politican during a lecture on rail safety
news As the saying goes, you have to practice what you preach
Sport
Mercedes Formula One driver Lewis Hamilton of Britain (front) drives ahead of Red Bull Formula One driver Daniel Ricciardo of Australia during the Chinese F1 Grand Prix at the Shanghai International circuit
sport Hamilton captured his third straight Formula One race with ease on Sunday, leading from start to finish to win the Chinese Grand Prix

Arts & Entertainment
Billie Jean King, who won the women’s Wimbledon title in 1967, when the first colour pictures were broadcast
tv
News
Snow has no plans to step back or reduce his workload
mediaIt's 25 years since Jon Snow first presented Channel 4 News, and his drive shows no sign of diminishing
Life & Style
food + drinkWhat’s not to like?
Voices
Clock off: France has had a 35‑hour working week since 1999
voicesThere's no truth to a law banning work emails after 6pm, but that didn’t stop media hysteria
Arts & Entertainment
Maisie Williams of Game of Thrones now
tvMajor roles that grow with their child actors are helping them to steal the show on TV
Arts & Entertainment
Kingdom Tower
architecture
Life & Style
Lana Del Rey, Alexa Chung and Cara Delevingne each carry their signature bag
fashionMulberry's decision to go for the super-rich backfired dramatically
Finacial products from our partners
Property search
Have you tried new the Independent Digital Edition iPad app?
Independent Dating
and  

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    1st Line Helpdesk Engineer Apprentice

    £150.00 per week: QA Apprenticeships: This company has been providing on site ...

    Telesales & Sales Support Apprentice

    £221.25 per week: QA Apprenticeships: This company is a well established Inter...

    Client Relationship Manager - SQL, Python

    £40000 - £50000 per annum: Harrington Starr: Client Relationship Manager - SQL...

    **Financial Services Tax**

    £35000 - £50000 per annum: Pro-Recruitment Group: Take your chance to join the...

    Day In a Page

    How I brokered a peace deal with Robert Mugabe: Roy Agyemang reveals the delicate diplomacy needed to get Zimbabwe’s President to sit down with the BBC

    How I brokered a peace deal with Robert Mugabe

    Roy Agyemang reveals the delicate diplomacy needed to get Zimbabwe’s President to sit down with the BBC
    Video of British Muslims dancing to Pharrell Williams's hit Happy attacked as 'sinful'

    British Muslims's Happy video attacked as 'sinful'

    The four-minute clip by Honesty Policy has had more than 300,000 hits on YouTube
    Church of England-raised Michael Williams describes the unexpected joys in learning about his family's Jewish faith

    Michael Williams: Do as I do, not as I pray

    Church of England-raised Williams describes the unexpected joys in learning about his family's Jewish faith
    A History of the First World War in 100 moments: A visit to the Front Line by the Prime Minister's wife

    A History of the First World War in 100 moments

    A visit to the Front Line by the Prime Minister's wife
    Comedian Jenny Collier: 'Sexism I experienced on stand-up circuit should be extinct'

    Jenny Collier: 'Sexism on stand-up circuit should be extinct'

    The comedian's appearance at a show on the eve of International Women's Day was cancelled because they had "too many women" on the bill
    Cannes Film Festival: Ken Loach and Mike Leigh to fight it out for the Palme d'Or

    Cannes Film Festival

    Ken Loach and Mike Leigh to fight it out for the Palme d'Or
    The concept album makes surprise top ten return with neolithic opus from Jethro Tull's Ian Anderson

    The concept album makes surprise top ten return

    Neolithic opus from Jethro Tull's Ian Anderson is unexpected success
    Lichen is the surprise new ingredient on fine-dining menus, thanks to our love of Scandinavian and Indian cuisines

    Lichen is surprise new ingredient on fine-dining menus

    Emily Jupp discovers how it can give a unique, smoky flavour to our cooking
    10 best baking books

    10 best baking books

    Planning a spot of baking this bank holiday weekend? From old favourites to new releases, here’s ten cookbooks for you
    Jury still out on Manchester City boss Manuel Pellegrini

    Jury still out on Pellegrini

    Draw with Sunderland raises questions over Manchester City manager's ability to motivate and unify his players
    Ben Stokes: 'Punching lockers isn't way forward'

    Ben Stokes: 'Punching lockers isn't way forward'

    The all-rounder has been hailed as future star after Ashes debut but incident in Caribbean added to doubts about discipline. Jon Culley meets a man looking to control his emotions
    Mark Johnston: First £1 million jackpot spurs him on

    Mark Johnston: First £1 million jackpot spurs him on

    The most prize money ever at an All-Weather race day is up for grabs at Lingfield on Friday, and the record-breaking trainer tells Jon Freeman how times have changed
    Ricky Gervais: 'People are waiting for me to fail. If you think it's awful, then just don't watch it'

    Ricky Gervais: 'People are waiting for me to fail'

    As the second series of his divisive sitcom 'Derek' hits screens, the comedian tells James Rampton why he'll never bow to the critics who habitually circle his work
    Mad Men series 7, TV review: The suits are still sharp, but Don Draper has lost his edge

    Mad Men returns for a final fling

    The suits are still sharp, but Don Draper has lost his edge
    Google finds a lift into space will never get off the ground as there is no material strong enough for a cable from Earth into orbit

    Google finds a lift into space will never get off the ground

    Technology giant’s scientists say there is no material strong enough for a cable from Earth into orbit