Claire Andrews, a radiographer from Aylesbury, Buckinghamshire, may be only 31 but she's worried about retirement.
"Although I have been part of the NHS pension scheme for the past six years, I worry that this will not be enough to provide for extra things like travelling when I stop working," she says. "I am also concerned that as a couple, my husband Gareth and I do not have a secondary retirement income as he has no pension provisions at all."
But Claire isn't convinced that traditional pension schemes are the best way forward, and she's nervous about investing in the stock market – either directly or through funds. "We would prefer to have savings and possibly invest in property in the future instead of a pension, so we need to know more about low-risk saving. I worry that we will find it hard to find a balance between saving for the future and being able to enjoy life in the meantime." The couple certainly has big ideas for their disposable cash, with plans for a home extension and a mortgage-free life as soon as possible.
The couple are in a stable financial situation. Claire earns about £40,000 a year; they have a repayment mortgage on their new £220,000 home and have about £10,000 in cash ISAs. They are even coming to the end of hire purchase arrangements for their two cars. There is critical illness and life cover worth about £115,000 should something happen to either partner, and if Claire dies while still working for the NHS, Gareth should receive an £80,000 death in service benefit.
"Claire, unlike many young Britons, has not found herself debt laden, overleveraged and in a vicious circle of spending," says Darius McDermott of Chelsea Financial Planning. "Instead, she is wisely looking to her future and what income she will need to fund her retirement."
Once the couple have tweaked their financial plans a little, there may even be a little money left over to enjoy.
Claire has a valuable NHS final salary pension scheme, but if she wants to retire 10 years early as planned, she should consider making additional voluntary contributions (AVCs).
"Meanwhile, if Gareth's employer offers him a pension scheme with the opportunity of employer contributions, then he should join the scheme immediately," suggests AJ Somal of independent financial advisers Uniec Financial Solutions. "If not, he can create a private stakeholder/personal pension, increasing his contributions as he gets closer to retirement."
But the couple aren't convinced of the value of paying into an additional pension for Gareth and are instead keen to increase their savings and property portfolio.
The couple's £10,000 savings will cushion them against unforeseen emergencies, but they are eager to add to their medium- and long-term savings.
Equities historically outperform cash savings, but as risk-averse Claire does not want to link her savings to the stock market, her options are limited to cash accounts and fixed-rate bonds. "At the moment, the average instant access account will have a negative real return when you factor in savings tax and inflation," warns Mr McDermott. "Claire is prepared to fix her cash on deposit but at the moment interest rates are set at a 400-year low. Taking a fixed-term account now would be unwise as it is highly likely that rates will begin to rise once the economy improves, and banks and building societies will begin to offer far more attractive returns on savings.
"While she's waiting for better rate,s Claire should make sure she is getting the best return on her cash ISA. Currently, Barclays is offering an instant-access cash ISA paying 2.55 per cent."
Claire and Gareth have a repayment mortgage charging interest at 6.19 per cent a year, plus loans for their cars. If they can pay these debts off quickly this could save them more in interest than they could earn on cash savings. It will also mean they can move on to their next property purchase sooner.
"Most mortgage deals these days allow overpayments, but Claire should check for any charges," says Robin Keyte from financial adviser Towers of Taunton. "By overpaying, Claire gains a saving in the interest that would have been charged at 6.19 per cent, which she wouldn't be able to achieve in savings rates.
The mortgage interest rate itself is particularly high as Gareth and Claire arranged the 90 per cent loan in a difficult time for borrowers. They should make sure they know when their fixed rate loan ends to arrange a better rate as soon as possible. Overpaying their mortgage now may also mean a cheaper rate on a smaller loan when the couple's current deal ends.
Insurance and wills
Claire and Gareth have critical illness and life insurance in place but want to review this in light of the larger mortgage on their new home.
"They should considering taking out separate life polices so that if a plan pays out on one claim, the other spouse is still covered on their policy," says Mr Somal. "The sum assured should be in addition to the new mortgage balance so that on death the surviving spouse has enough funds to pay off the mortgage balance and can use the surplus to maintain their current standard of living."
A decreasing term life policy, which pays out gradually less if a claim is made, could be a cheaper alternative to standard level term assurance. "But before spending the extra cash, Claire should think carefully about whether the death before retirement benefit under the NHS scheme provides enough of a top-up for her life cover," says Mr Keyte. "If so, the question is whether her husband has access to a death in service benefit under his employment. If not, they may like to consider increasing insurance on his life only." The couple's critical illness (CI) cover will pay a lump sum on the diagnosis of a specified medical condition to repay the outstanding mortgage. However, several medical conditions are not covered by CI which would force you off work through sickness.
"Instead, income protection (IP) insurance can provide a tax-free replacement income of up to 50 per cent of your gross earned income, until retirement age or when you return to work if sooner" Mr Keyte adds.
Finally, some 50 per cent of UK adults, including Claire and Gareth, don't have a valid will. All three advisers urge the couple to write one each to make sure their assets are passed on to the right people.
Do you need a financial makeover ?
Write to Julian Knight at the Independent on Sunday, 2 Derry Street, London W8 5HF