Wealth Check: 'I retire in 10 years. Is my pension plan a good one?'

Linda Dickins plans to retire in about 10 years from her job as a community psychiatric nurse, a job she trained for late in life.

Linda Dickins plans to retire in about 10 years from her job as a community psychiatric nurse, a job she trained for late in life.

She shares her home with her second husband, who is semi-retired. Ms Dickins owns a property in Sheffield, South Yorkshire, which she lets to her son, his fiancée and a lodger.

She wants to know whether she is on track for retirement and whether her pension provider is a good one. She also wants advice on capital gains tax on rental property; she would like to use the profits from it to help her children on to the property ladder.

We put her case to Danny Cox at Hargreaves Lansdown, Alick Howard at MDM Associates and Matthew Morris at Rickman Tooze.

LINDA DICKINS, 51, COMMUNITY PSYCHIATRIC NURSE

Salary: £25,000

Debts: £1,280 (car loan plus credit card at 0 per cent)

Property: Home owned with husband, worth about £150,000 with mortgage of £36,000

Savings: £2,200 in cash Isa; Norwich Union endowment policy, worth between £5,000 and £9,000

Pension: NHS pension; also pays £50 a month into the National Pension Fund for Nurses.

Spending: Around £600 per month including mortgage payments

Ms Dickins's NHS pension will pay her twenty-eightieths of her final salary, assuming she works for 10 more years and stays in the scheme. This will give her a pension of about £6,000 a year.

According to Mr Howard, the National Pension Fund for Nurses was taken over by Liverpool Victoria and is now a closed fund. There is no penalty for switching out of the with-profits fund, so Mr Howard suggests Ms Dickins could think about moving, perhaps to Liverpool Victoria's main with-profit fund, a good performer.

Mr Cox suggests Ms Dickins could boost her retirement by putting more into the NHS pension scheme. She could also increase her National Insurance contributions, to bolster her state pension, by making additional (Class 3) contributions. This would cover her 10-year career break, when she was bringing up her children.

Assuming Ms Dickins will have paid off her mortgage by retirement, she is on track for a standard of living roughly comparable to her current take-home pay.

PROPERTY

If Ms Dickins sells her second property she could be liable for capital gains tax (CGT). The exact amount, though, depends on when she sells. If she keeps the Sheffield house she will only pay 60 per cent of the tax due. Mr Howard calculates that if she is a basic rate tax payer at that time, the rate of tax will, in effect, be only 12 per cent.

Mr Morris suggests that any CGT bill may not be that large, especially given the money Ms Dickins has spent on refurbishment. However, one way to minimise the tax would be for Ms Dickins to sell the house to her son now, using her annual CGT exemption to cover any small gains. If she transfers ownership so that the house is in her and her husband's name, the CGT allowance doubles to £16,400.

Given that Ms Dickins does not make any money by renting the Sheffield house to her son - the panel point out that the rental income barely covers costs, even before refurbishment - selling the house to her son could make sense. He would not have to pay any capital gains tax should he come to sell later, because main residences are exempt. The family would, of course, have to allow for sales costs, especially stamp duty, if the house is worth more than £60,000.

ENDOWMENT POLICY AND SAVINGS

As Ms Dickins has a repayment mortgage, she will not suffer a shortfall from her endowment. This gives her a degree of flexibility in deciding what to do with the policy. Mr Cox suggests that if the endowment is with-profits, Ms Dickins should not pay anything further into it but instead divert the money into a lower cost, cheaper savings vehicle such as the cash Isa or additional voluntary contributions to her pension.

Mr Cox and Mr Howard agree that Ms Dickins should keep, not sell, the policy, because this will give her the best overall return. Mr Morris suggests that when the policy matures, the money could be used to bolster Ms Dickins's retirement income.

Mr Howard says that because Ms Dickins only has a mini cash Isa at the moment, she could increase her tax-free savings by taking out a stocks and shares Isa. A corporate bond fund might suit her better if she prefers to avoid the risks of shares.

DEBTS

Ms Dickins has few debts and her car loan will be paid off later this year. However, Mr Howard says that Ms Dickins should look around for another 0 per cent credit card offer when the introductory rate on her current credit card expires.

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?
SPONSORED FEATURES
Independent Dating
and  

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Content Writer - Global Financial Services

    £25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...

    Recruitment Genius: Web Developer - PHP

    £35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...

    Recruitment Genius: Field Sales Consultant - Financial Services - OTE £65,000

    £15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...

    Recruitment Genius: Loan Underwriter

    £18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...

    Day In a Page

    A nap a day could save your life - and here's why

    A nap a day could save your life

    A midday nap is 'associated with reduced blood pressure'
    If men are so obsessed by sex, why do they clam up when confronted with the grisly realities?

    If men are so obsessed by sex...

    ...why do they clam up when confronted with the grisly realities?
    The comedy titans of Avalon on their attempt to save BBC3

    Jon Thoday and Richard Allen-Turner

    The comedy titans of Avalon on their attempt to save BBC3
    The bathing machine is back... but with a difference

    Rolling in the deep

    The bathing machine is back but with a difference
    Part-privatised tests, new age limits, driverless cars: Tories plot motoring revolution

    Conservatives plot a motoring revolution

    Draft report reveals biggest reform to regulations since driving test introduced in 1935
    The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

    The Silk Roads that trace civilisation

    Long before the West rose to power, Asian pathways were connecting peoples and places
    House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

    The honours that shame Britain

    Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
    When it comes to street harassment, we need to talk about race

    'When it comes to street harassment, we need to talk about race'

    Why are black men living the stereotypes and why are we letting them get away with it?
    International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

    International Tap Festival comes to the UK

    Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
    War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

    Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

    Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
    Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

    'A subversive brothel keeper and Communist'

    Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
    Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

    BBC heads to the Californian coast

    The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
    Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

    Victorian fraudster who shook the Bank of England

    Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
    Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

    Car hacking scandal

    Security designed to stop thieves hot-wiring almost every modern motor has been cracked
    10 best placemats

    Take your seat: 10 best placemats

    Protect your table and dine in style with a bold new accessory