Wealth Check: 'I want to retire at 60 and travel, so how should I plan my finances?'

Sheelagh Donovan would like to retire in eight years when she is 60. "I'd continue working longer if it made substantial economic sense but I'd rather not have to," she says.

Sheelagh Donovan would like to retire in eight years when she is 60. "I'd continue working longer if it made substantial economic sense but I'd rather not have to," she says.

Ms Donovan has been an information officer for Age Concern in South London since November, 2002. Before that, she spent 20 years with the Milk Marketing Board and worked for a firm offering advice on people's work-life balance. She lives in a one-bedroom flat in Sutton, Surrey, and has paid off her mortgage.

Luckily, she was in the final-salary scheme of the Milk Marketing Board and is a member of a handful of other personal and private schemes. "Is there any advantage in consolidating all my pension pots?" she asks. "Should I leave my Milk Marketing Board pension where it is? I have had a letter from trustees outlining plans to amend the scheme."

She has a NPI capital bond and would like advice after the proposal by AMP, the life insurance company, to de-merge from NPI. Much of her savings are in building society accounts. "I'd like to invest in something that will out perform building society rates but I don't want substantial risks," she says.

We asked Anna Bowes, of Chase de Vere Investments, Bob Riach, of Riach Independent Financial Advisers, Charles Ansdell, of Inter-Alliance and Roderic Rennison, of Charcol.

Case Study:
Sheelagh Donovan, information officer

Name: Sheelagh Donovan;

Age: 52;

Status: Single;

Occupation: Information officer for Age Concern;

Education: BSC in nutrition from University of Surrey;

Car: Fiat Tipo;

Salary: £25,000 ;

Property: One-bedroom flat in Sutton, Surrey;

Savings: Premium bonds; mini-cash Isa with Nationwide; Tessa about to mature; £8,000 in index-linked savings certificates; building society accounts; NPI capital bond bought 1993; Newton Pep taken out in 1993; Merrill Lynch Pep taken out in 1998;

Pension: Milk Marketing Board final-salary pension (20 years service); personal pension; five years deferred group personal pension; Age Concern money-purchase scheme;

Shares: Northern Rock and International Power;

Outgoings: (Per month) £1,100.

Solution 1: Pension

Ms Bowes says there is no problem with Ms Donovan having different sources of income in retirement . Her final-salary scheme is likely to be the most valuable of her pensions. Although the trustees of the pension have suggested there may be alterations there is no evidence these amendments wil l adversely affect her.

Mr Riach says it may be worth Ms Donovan transferring the five years of contributions into her Age Concern scheme. She should ask those trustees for a transfer value and ask Age Concern's administrators to show what additional benefits this will produce. Mr Riach recommends leaving her personal pension with the present provider, to avoid transfer fees.

Solution 2: Property

Mr Ansdell says there is little point in doing anything with her property at present since she needs somewhere to live. When she has retired, she could release the equity in her house for extra income.

Solution 3: NPI bond

Ms Bowes says with-profits bonds have been suffering for some time and NPI are among the casualties. But the problem lies with future performance as opposed to the security of her capital. It is likely her NPI bond will be in cash and fixed interest securities. This means the underlying fund may be lower-risk but it does not offer great potential for strong future performance because it will not benefit from growth in the stock market.

So while there is likely to be a penalty for cashing in the bond she may get better performance elsewhere. She must choose a company with significant financial strength such as the Prudential, Standard Life or Legal & General.

Mr Rennison says Ms Donovan should leave her NPI bond alone. AMP have withdrawn from the market because they wish to protect shareholders from further financial strain. There should be no further losses.

Solution 4: Savings

Ms Bowes says during the long bear market of the last three years Ms Donovan's investment choices have served her well. Cash has outperformed stocks and shares considerably. But that it is not the ideal investment environment for the longer term.

There are investments that have the potential to benefit from any rise in the stock market while keeping capital safe, but there are few to choose from. A guaranteed-equity bond will offer a proportion of any rise in a market index and guarantee to at least return the original investment at the end of the term if the market drops. She recommends the Portman building society Guaranteed Equity Bond or the Newcastle building society FTSE Bond 2.

Mr Ansdell says Ms Donovan should invest in a cash mini-Isa (up to £3,000 a year). She should also consider index-linked gilts which are relatively safe investments.

Mr Riach says Ms Donovan's premium bonds can be viewed as a no-risk investment, with a possible win. He has clients who invest in premium bonds for the excitement and a return above building society rates. After the rally in word stock markets she should review her Newton and Merrill Lynch Peps. These funds may have been appropriate when bought, but will not now be the best funds to take advantage of the present investment climate.

Ms Donovan should also maximise her Isa allowance by arranging a stock market-based Isa investment with a wide range of investment funds to reduce volatility. Mr Riach recommends a Skandia multi-Isa which offers a choice of more than 100 funds. She should also sell her shares because these are high-risk investments.

* If you would like to be given a financial health check-up, write to: Wealth Check, 'The Independent', 191 Marsh Wall, London E14 9RS, or e-mail cash@independent.co.uk

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

PROMOTED VIDEO
News
Gardai wait for the naked man, who had gone for a skinny dip in Belfast Lough
newsTwo skinny dippers threatened with inclusion on sex offenders’ register as naturists criminalised
Sport
Van Gaal said that his challenge in taking over Bobby Robson's Barcelona team in 1993 has been easier than the task of resurrecting the current United side
football
Arts and Entertainment
The Great British Bake Off 2014 contestants
tv
Life and Style
tech
Arts and Entertainment
filmThe Battle of the Five Armies trailer released
News
news
Arts and Entertainment
Beast would strip to his underpants and take to the stage with a slogan scrawled on his bare chest whilst fans shouted “you fat bastard” at him
musicIndie music promoter was was a feature at Carter gigs
Arts and Entertainment
Story line: Susanoo slays the Yamata no Orochi serpent in the Japanese version of a myth dating back 40,000 years
arts + entsApplying the theory of evolution to the world's many mythologies
Extras
indybest
News
Performers dressed as Tunnocks chocolate teacakes, a renowned Scottish confectionary, perform during the opening ceremony of the 2014 Commonwealth Games at Celtic Park in Glasgow on July 23, 2014.
news
Life and Style
Popular plonk: Lambrusco is selling strong
Food + drinkNaff Seventies corner-shop staple is this year's Aperol Spritz
Life and Style
Shake down: Michelle and Barack Obama bump knuckles before an election night rally in Minnesota in 2008, the 'Washington Post' called it 'the fist bump heard round the world'
newsThe pound, a.k.a. the dap, greatly improves hygiene
Arts and Entertainment
La Roux
music
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Senior Fund Administrator - Edinburgh - £22 p/hr

    £20 - £22 per hour + competitive: Orgtel: Senior Fund Administrator, Top Four ...

    Entry Level Fund Accountant (Edinburgh)

    £17 - £20 per hour: Cameron Kennedy Recruitment: My client, one of the worlds ...

    SQL DBA/Developer

    £600 per day: Harrington Starr: SQL DBA/Developer
 SQL, C#, VBA, SQL Server, ...

    Risk Analyst - VBA/EXCEL

    £300 - £600 per day: Harrington Starr: Risk Analyst Access, EXCEL, VBA, RISK, ...

    Day In a Page

    The children were playing in the street with toy guns. The air strikes were tragically real

    The air strikes were tragically real

    The children were playing in the street with toy guns
    Boozy, ignorant, intolerant, but very polite – The British, as others see us

    Britain as others see us

    Boozy, ignorant, intolerant, but very polite
    Countries that don’t survey their tigers risk losing them altogether

    Countries that don’t survey their tigers risk losing them

    Jonathon Porritt sounds the alarm
    How did our legends really begin?

    How did our legends really begin?

    Applying the theory of evolution to the world's many mythologies
    Watch out: Lambrusco is back on the menu

    Lambrusco is back on the menu

    Naff Seventies corner-shop staple is this year's Aperol Spritz
    A new Russian revolution: Cracks start to appear in Putin’s Kremlin power bloc

    A new Russian revolution

    Cracks start to appear in Putin’s Kremlin power bloc
    Eugene de Kock: Apartheid’s sadistic killer that his country cannot forgive

    Apartheid’s sadistic killer that his country cannot forgive

    The debate rages in South Africa over whether Eugene de Kock should ever be released from jail
    Standing my ground: If sitting is bad for your health, what happens when you stay on your feet for a whole month?

    Standing my ground

    If sitting is bad for your health, what happens when you stay on your feet for a whole month?
    Commonwealth Games 2014: Dai Greene prays for chance to rebuild after injury agony

    Greene prays for chance to rebuild after injury agony

    Welsh hurdler was World, European and Commonwealth champion, but then the injuries crept in
    Israel-Gaza conflict: Secret report helps Israelis to hide facts

    Patrick Cockburn: Secret report helps Israel to hide facts

    The slickness of Israel's spokesmen is rooted in directions set down by pollster Frank Luntz
    The man who dared to go on holiday

    The man who dared to go on holiday

    New York's mayor has taken a vacation - in a nation that has still to enforce paid leave, it caused quite a stir, reports Rupert Cornwell
    Best comedians: How the professionals go about their funny business, from Sarah Millican to Marcus Brigstocke

    Best comedians: How the professionals go about their funny business

    For all those wanting to know how stand-ups keep standing, here are some of the best moments
    The Guest List 2014: Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks

    The Guest List 2014

    Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks
    Jokes on Hollywood: 'With comedy film audiences shrinking, it’s time to move on'

    Jokes on Hollywood

    With comedy film audiences shrinking, it’s time to move on