'Wealth Check: 'I want more time to cook and play guitar'

Helen Black, 35, is a married sales administrator from Reading. She and her husband, an engineering salesman, are both settled in jobs they enjoy and are paying off their mortgage. Her aim is to be financially secure so she can dedicate her spare time to hobbies. She loves gardening, cooking and Surrealist painting and plays bass guitar in a local band.

"All I really want out of life is to be comfortable, happy, secure and creative," she says. "I'd like some advice about how best to build up and invest my savings to make sure we'll always be OK."

Case notes

Income: £29,500.
Savings: £20,000 in savings, current and ISA accounts
Monthly outgoings: £1,597
Debts: None

Our expert advisers this week are AJ Somal from Uniec Financial Solutions, Duncan Carter from Clearwater Financial Planning and Robin Keyte from Towers of Taunton.

Savings

Money doesn't buy happiness but, in Helen's situation, it will certainly help. She wants to enjoy her spare time without worrying about her finances, and this means building up savings to act as a fall-back.

A good start has already been made, but the experts think Helen is in a great position to save even more because she lives well within her means.

Carter says: "Taking action now and establishing a long-term plan is key to Helen meeting her immediate and longer term objectives."

Keyte estimates the couple could have a surplus income of £10,000 per year providing they each bring in a net income of at least £22,200. He recommends cash ISAs at Chesham Building Society or Bradford & Bingley, which are currently offering good interest rates.

Helen might also want to consider transferring any current ISA savings to Birmingham Midshires, which is offering generous transfer-in deals in a bid to attract new investors.

"Be a rate tart," says Keyte. "Do not be afraid to swap providers to chase the best rates of interest."



Mortgage

Helen strives for security, so the sooner she can own her house outright the better. She currently has a £120,000 mortgage on a £250,000 house with Abbey National and Keyte recommends making overpayments on this now while she is still at her earning prime.

He says: "Most mortgage deals these days will allow you to overpay up to 10 per cent of the outstanding capital each year. The return you would derive from these overpayments is equivalent to the mortgage interest that would have been charged, which is almost certainly higher than the interest you can presently earn on cash ISAs."

Pension

Helen is not expecting yachts and cruises on retirement, but would like to carry on living as she does now after the age of 65.

Carter says: "Of key importance is that she does not delay making the commitment as the costs start to increase sharply the closer one gets to retirement. Equally a regular review process should be established to ensure she remains on track to achieve these quite demanding goals."

She should contact The Pension Service for an estimate of what her state pension will be, but Keyte predicts it could be around £400 per month.

To make this up to the required £1,200 per month, she would need an overall pension fund of £180,000. Helen currently pays £50 per month into her pension, but Keyte recommends increasing overall contributions to five per cent of her salary, while Somal recommends 10 per cent.

He says: "If the company is matching her contributions, then she should increase her payments and take advantage of the employer contributions."

Insurance

Helen should also consider how she will meet her costs if she ever has to take long-term sick leave. Somal says: "Helen and her husband should seriously consider taking out income protection cover – also known as Permanent Health Insurance – to protect their incomes."

He says Helen needs to find out how long her company will pay her to be off sick, and then arrange for an insurance package to kick in after that period. She can protect about 60 per cent of her gross income in this way.

Carter adds: "Without such protection there would be a significant fall in income and thus standard of living. The cost of index-linked protection would be in the region of £35 to £40 per month each."

For a free financial check-up, write to Wealth Check, The Independent, 2 Derry Street, London W8 5HF; or email wealthcheck@independent.co.uk.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

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