Wealth Check: 'I need to plan my finances in my year off'

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Case notes

Jane Allan, 52, social worker, the Cotswolds

Personal: Jane Allan is a 52-year-old single social worker who has worked for 27 years but is now planning a year off.

Income: about £2,845 a month (£2,140 after national insurance and tax).

Monthly outgoings: about £760 a month on living expenses and holiday budgeting, £270 a month on savings and insurance, and £350 a month on a mortgage and endowment.

Savings: £38,642 comprising premium bonds (£1,200), Bradford & Bingley Easysaver mini cash ISAs (£9,300), Bradford & Bingley fixed-rate cash ISA (£10,123), Fidelity WealthBuilder fund (£8,988), C&G Invest Direct savings account (£4,050), HBOS shares (£185), Equity Income fund (£4,040.65), Standard Life shares to come (£750).

Property: Jane's home is worth about £220,000.

Jane Allan, a 52-year-old single social worker from the Cotswolds, has worked full-time for the past 27 years. In July, she plans to take one year's unpaid leave. She may go on a gardening traineeship, which would pay her a small wage, and could do some consultancy work, but does not want to plan on the basis of having money coming in.

She has already started building cash for her £17,000 of living expenses over the next year by selling off investments. She dispensed with a £7,790 holding in Invesco Perpetual European Growth, and also raised £8,722 by cashing in her investment in a Scottish Widows With-Profits Bond. Having freed up this cash, Jane wants guidance on how to bank it, ideally so it's easy to get at and earning a decent rate of interest.

Once she's off work, Jane wonders what to do about her other investments. Should she suspend her contributions to Fidelity WealthBuilder? Should she sell her Standard Life shares? And what should she do with her Bradford & Bingley individual savings accounts (ISAs) - particularly the fixed-rate deal, which has now matured?

Her final worry is how her time off will affect her pension. Should Jane make voluntary National Insurance contributions and payments into her occupational plan, the Local Government Pension Scheme?

We asked three independent financial advisers for help: Anna Bowes of Chase de Vere, James Davies of Chartwell Investment Management and Patrick Connolly of Towry Law JS&P.


Connolly suggests that Jane moves her living expenses money into an instant access account paying the highest rate of interest she can find. Davies agrees, but warns her to avoid accounts that come with short-term introductory offers of extra interest, as the headline rate is misleading. Instead he recommends no-notice accounts from Abbey, Capital One and ING Direct. In particular, Capital One is offering a good account that guarantees a rate of interest above the Bank of England's base rate until 2010.


Jane's ISAs are worth keeping because they offer tax-free interest, but she can move the maturing ISA cash to another provider - Bradford & Bingley pays only 4.3 per cent on the fixed-rate account - and earn more money without jeopardising the tax perks.

If Jane is happy to transfer to another fixed-rate offer, says Bowes, then the Halifax four-year fixed rate of 5.2 per cent is worth considering. She could also consider Kent Reliance's easy access ISA, which pays 4.86 per cent.


Bowes says that the WealthBuilder fund is a flexible savings vehicle. Jane can stop making savings into it without incurring any penalties and restart when she's back at work.

Jane would be as well dispensing of the HBOS shares since they add little or nothing to her portfolio, says Connolly. The rest of her assets are in collective funds.

The Standard Life shares, however, could be looked at differently, says Davies. These will be issued free to Jane when the insurer floats on the stock market later this month, so they are pure profit. It's possible that Standard could become a takeover target, in which case the share price will do well. Even speculation would push up the price.


Connolly sees no need for Jane to pay National Insurance during her time off. If she does end up in a position where there is a shortfall in her National Insurance contributions then HM Revenue & Customs will let her know, at which stage she can make the necessary payments, he says.

On the other hand, Connolly would like Jane to continue making contributions to the Local Government Pension Scheme, which is an excellent pension plan.

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