Wealth Check: 'I need to do more with my savings'

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The Independent Online

Pensions aren't a serious problem, either. Rowan is a member of the BBC's final salary pension scheme, which is well-regarded, and he makes additional voluntary contributions of £43 a month, which are matched by his employers.

However, most of Rowan's money is sitting in accounts run by First Direct; he is aware that this cash is not necessarily working as hard as it might.

One possible asset could be property, he suggests, even if he ends up renting out the house he buys. But what are the alternatives?

We asked three independent financial advisers to use their expertise to analyse Rowan's circumstances: Ben Yearsley of Hargreaves Lansdown, Darius McDermott of Chelsea Financial Services and Bhupinder Anand of Anand Associates.

Case notes

Rowan Bridge, 32, radio reporter

Annual income: "Enough to live on and put some savings by"

Monthly outgoings: Around £1,200 for spending on holidays, living expenses and costs such as savings and pensions.

Savings: Cash held in various First Direct accounts - this includes £7,500 in a bonus savings account, £6,300 in a cheque account and £17,400 in a cash individual savings account.

Pension: Member of the BBC's final salary pension scheme. It will pay up to two-thirds of his pre- retirement salary if he works until age 60 and remains with the corporation. Monthly additional voluntary contributions to the scheme of £43 are matched by his employer.

Property: Currently living in rented accommodation. Considering buying a property to live in or on a buy-to-let basis.


Ben Yearsley doesn't see any need for Rowan to rush out and buy a house. There are many costs involved with buying property - including stamp duty, legal fees and so on - so if he is forced to move in the short to medium term, this will be money down the drain.

The only worry for Rowan, Yearsley suggests, is if house price inflation suddenly rises sharply once again, in which case he might be priced out of the market in future. But until Rowan has more certainty about where he might be living he should definitely hold off, Yeasley argues.

The adviser is no more convinced by buy-to-let investment. As property prices have risen, it has become harder for new buyers to make money, he warns. Then there is all the worry about whether the property can be consistently rented out. One slight glitch and landlords end up in the red.

However, Darius McDermott says it might be worthwhile for Rowan to buy somewhere once his employers have made a decision about a more permanent base. With a fairly sizeable deposit, and as a first-time buyer, Rowan should be in a position to move quite quickly, so house price rises should only have a limited impact. If he is forced to relocate subsequently then he could look at renting it out.


Bhupinder Anand says that Rowan is fortunate to be a member of an excellent final salary pension scheme. He could add to his retirement plans with an individual private pension, but Anand feels that for many people, a personal or stakeholder pension can be restrictive.

Should Rowan be willing to take the risk, venture capital trusts might be another way to plan for the long term, as long as he splits his money between at least three different ones to give diversification.

These trusts invest in small high-risk companies but offer generous tax breaks. Even basic-rate taxpayers qualify for a 40 per cent income rebate on investments. Plus, after three years, assuming no growth or losses, Rowan could roll the funds over into a pension and potentially claim 40 per cent pension tax relief on the same cash.


McDermott says that the interest rates Rowan is earning on his various First Direct accounts are fairly competitive. Even so, he should shop around. Egg's internet-only monthly savings account is offering 4.65 per cent. HSBC's Online Savers account is offering 4.60 per cent.

Similarly, Rowan's First Direct cash ISA will revert to the standard cash ISA rate of 4.22 per cent in October. At that rate there are a range of companies offering better returns: Intelligent Finance is offering 5 per cent, for example, while Yorkshire Building Society pays 5.20 per cent.

Yearsley advises making better use of the £14,000 currently held in Rowan's cheque and savings accounts. If Rowan hasn't used his ISA allowance to invest in cash, he could move up to £7,000 of the money into a stocks and shares ISA. Returns on all ISAs are basically tax free, but a stocks and shares plan will give Rowan the opportunity to build a diversified portfolio of assets.

Yearsley thinks a great place for anybody to start is equity income funds. These predominantly invest in UK-based companies that are profitable and pay dividends. Ideal funds to look at, he suggests, include Invesco Perpetual's Higher Income fund, Artemis Income or Jupiter Income. Rowan could hold more than one of these to spread the risk.

In addition to UK-based investments, he should also have some overseas exposure, Yearsley says. Artemis European Fund, First State Greater Pacific and JPMF Japan Fund are all possibilities, Yearsley says, and if Rowan wants something really spicy, a fund investing in China or India could be exciting.

Anand thinks that, for the long term, Rowan should consider a good commercial property fund such as Glanmore. He also says an offshore second-hand endowment policy is worth considering.


Being single, and with no one else to worry about financially, Rowan doesn't actually need life assurance, but he might want to consider either permanent health insurance or critical illness cover.

PHI pays out in the event that Rowan can't do his normal work due to an accident or ill-health. Normally, policies begin paying out after three or six months off work and they will potentially keep paying until retirement age. Critical illness insurance will pay out a lump sum on diagnosis of a critical illness. The cost might be £30 to £40 a month for about £100,000 worth of cover.

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