Wealth Check: 'My pension is fine, but can I invest more wisely?'

Ashley Agar works as a sales executive for a software company in the Thames Valley and at the moment is living with his parents.

Although he has no immediate plans to enter a property market where he feels prices are exorbitant, he would be interested to learn how much he could borrow, and what it would cost.

If he were to buy, his ideal areas would be Reading in Berkshire, or west London.

Mr Agar is comfortable with his pension arrangements, not least because of his employer's contribution and tax relief. But he feels he might be able to invest his money better.

He would like to put more money into the stock market, ideally through managed funds or a fund of funds.

He envisages making an initial investment of £5,000 to £7,000, in addition to his tracker fund.

ASHLEY AGAR, 34, SALES EXECUTIVE FOR IT COMPANY

Salary: £50,000 a year.

Debt: Repayments of £300 a month to parents for loan to buy a car (5 per cent interest).

Property: Lives with parents, pays £350 a month.

Savings: £9,000 with ING Direct (4.9 per cent interest); £1,000 with Portman Building society: £2,000 in current account with First Direct.

Investments: £1,800 in Virgin tracker Isa (£100 a month).

Pension: Five years' membership of Scottish Amicable, worth c. £20,000.

Outgoings: Monthly include petrol (£135) and mobile (£43).

We put his case to Justin Modray at BestInvest, Meera Patel at Hargreaves Lansdown and Matt Pitcher at Towry Law.

SAVINGS

Mr Agar has done well to build up a reasonable amount of cash savings. But Mr Modray points out that, as a higher-rate tax payer, he should be taking advantage of cash Isas to maximise his returns. Assuming Mr Agar has set up his Virgin tracker fund as a mini Isa, he can pay up to £3,000 into a cash account.

Abbey currently offers 5.1 per cent on its mini cash Isa. Mr Agar would have to earn 8.5 per cent gross to equal this. Ms Patel says that he can earn more, if he is willing to tie up his money for longer: Lambeth Building Society pays 5.15 per cent, subject to 45 days' notice of withdrawals. Ms Patel suggests that Mr Agar should have a financial cushion of three to six months' salary for emergencies. Once he has set that aside, he can consider investments or shifting money from his current account to savings.

INVESTMENTS

Ms Patel says that in order to put more money into the stock market, Mr Agar should be happy to leave it there for five to 10 years. Assuming he can do this, she suggests Cazenove's UK Growth and Income Fund, managed by Tim Russell, for an actively managed fund based on UK equities.

Mr Modray says that Mr Agar could split his investments, even if he were to invest just the mini Isa limit of £3,000. He suggests putting £1,000 into Artemis UK Special Situations, £750 into Cazenove European, £750 into Legg Mason US Equity and the balance into Aberdeen Asia Pacific.

In any case, Mr Agar should review his Virgin tracker which, with charges at 1 per cent, is expensive for a passive fund. Ms Patel suggests M&G's tracker and Mr Modray, Legal & General. Both have lower fees than Virgin. Mr Pitcher cautions that if Mr Agar does want to buy a property in the future, he should be wary of putting his savings into the stock market.

PENSION

Mr Agar pays in pension contributions of six per cent of his gross salary. Mr Pitcher says this is reasonable for someone of his age. But he points out that if Mr Agar started paying into his pension in his late 20s, he will already have missed out on some significant growth. He will need to make this up with additional contributions. He should check his pension provider's annual forecasts of his retirement income. Mr Modray and Ms Patel both suggest that Mr Agar reviews the funds his pension plan invests in. He can afford to maximise his exposure to the stock markets. He can switch to safer funds as he approaches retirement.

PROPERTY

Properties in Mr Agar's ideal areas - Reading and west London - do not come cheap. Mr Pitcher reckons that most lenders would agree a mortgage of 3.5 to four times Mr Agar's salary, based on his basic income and half his annual bonus. This would allow him to borrow up to £180,000.

Some lenders may offer more but Mr Pitcher believes this could work in Mr Agar's favour.

If Mr Agar were to buy now, Ms Patel calculates that a 90 per cent, repayment mortgage of £180,000 with Portman Building Society would cost around £1,000 a month. An interest-only mortgage would cost £659, based on the society's two-year discounted rate of 4.39 per cent.

Ms Patel cautions that although some lenders might agree to lend Mr Agar as much as six or even eight times his salary, this would be unwise with interest rates on the way up.

* If you would like a financial 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
Life and Style
techCould new invention save millions in healthcare bills?
Sport
David Moyes gets soaked
sport Moyes becomes latest manager to take part in the ALS challenge
Voices
A meteor streaks across the sky during the Perseid Meteor Shower at a wind farm near Bogdanci, south of Skopje, Macedonia, in the early hours of 13 August
voicesHagel and Dempsey were pure Hollywood. They only needed Tom Cruise, says Robert Fisk
News
peopleEnglishman managed quintessential Hollywood restaurant Chasen's
Life and Style
food + drinkHarrods launches gourmet food qualification for staff
Arts and Entertainment
Michael Flatley prepares to bid farewell to the West End stage
danceMichael Flatley hits West End for last time alongside Team GB World champion Alice Upcott
Life and Style
Horst P Horst mid-fashion shoot in New York, 1949
fashionFar-reaching retrospective to celebrate Horst P Horst's six decades of creativity
News
Members and supporters of the lesbian, gay, bisexual, transgender (LGBT) community walk with a rainbow flag during a rally in July
i100
Life and Style
Black Ivory Coffee is made using beans plucked from elephants' waste after ingested by the animals
food + drinkFirm says it has created the "rarest" coffee in the world
Arts and Entertainment
Jamie T plays live in 2007 before going on hiatus from 2010
arts + entsSinger-songwriter will perform on the Festival Republic Stage
Life and Style
food + drinkThese simple recipes will have you refreshed within minutes
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

    Service Desk Analyst- Desktop Support, Helpdesk, ITIL

    £20000 - £27000 per annum: Harrington Starr: Service Desk Analyst- (Desktop Su...

    Service Desk Analyst - (Active Directory, Support, London)

    £25000 - £35000 per annum: Harrington Starr: Service Desk Analyst - (Active Di...

    Junior Quant Analyst - C++, Boost, Data Mining

    £30000 - £50000 per annum: Harrington Starr: Junior Quant Analyst - C++, Boost...

    Junior Quant Analyst (Machine Learning, SQL, VBA)

    £30000 - £50000 per annum: Harrington Starr: Junior Quant Analyst (Machine Lea...

    Day In a Page

    All this talk of an ‘apocalyptic’ threat is simply childish

    Robert Fisk: All this talk of an ‘apocalyptic’ threat is simply childish

    Chuck Hagel and Martin Dempsey were pure Hollywood. They only needed Tom Cruise
    Mafia Dons: is the Camorra in control of the Granite City?

    Mafia Dons: is the Camorra in control of the Granite City?

    So claims an EU report which points to the Italian Mob’s alleged grip on everything from public works to property
    Emmys look set to overhaul the Oscars as Hollywood’s prize draw

    Emmys look set to overhaul the Oscars as Hollywood’s prize draw

    Once the poor relation, the awards show now has the top stars and boasts the best drama
    What happens to African migrants once they land in Italy during the summer?

    What happens to migrants once they land in Italy?

    Memphis Barker follows their trail through southern Europe
    French connection: After 1,300 years, there’s a bridge to Mont Saint-Michel

    French connection: After 1,300 years, there’s a bridge to Mont Saint-Michel

    The ugly causeway is being dismantled, an elegant connection erected in its place. So everyone’s happy, right?
    Frank Mugisha: Uganda's most outspoken gay rights activist on changing people's attitudes, coming out, and the threat of being attacked

    Frank Mugisha: 'Coming out was a gradual process '

    Uganda's most outspoken gay rights activist on changing people's attitudes, coming out, and the threat of being attacked
    Radio 1 to hire 'YouTube-famous' vloggers to broadcast online

    Radio 1’s new top ten

    The ‘vloggers’ signed up to find twentysomething audience
    David Abraham: Big ideas for the small screen

    David Abraham: Big ideas for the small screen

    A blistering attack on US influence on British television has lifted the savvy head of Channel 4 out of the shadows
    Florence Knight's perfect picnic: Make the most of summer's last Bank Holiday weekend

    Florence Knight's perfect picnic

    Polpetto's head chef shares her favourite recipes from Iced Earl Grey tea to baked peaches, mascarpone & brown sugar meringues...
    Horst P Horst: The fashion photography genius who inspired Madonna comes to the V&A

    Horst P Horst comes to the V&A

    The London's museum has delved into its archives to stage a far-reaching retrospective celebrating the photographer's six decades of creativity
    Mark Hix recipes: Try our chef's summery soups for a real seasonal refresher

    Mark Hix's summery soups

    Soup isn’t just about comforting broths and steaming hot bowls...
    Tim Sherwood column: 'It started as a three-horse race but turned into the Grand National'

    Tim Sherwood column

    I would have taken the Crystal Palace job if I’d been offered it soon after my interview... but the whole process dragged on so I had to pull out
    Eden Hazard: Young, gifted... not yet perfect

    Eden Hazard: Young, gifted... not yet perfect

    Eden Hazard admits he is still below the level of Ronaldo and Messi but, after a breakthrough season, is ready to thrill Chelsea’s fans
    Tim Howard: I’m an old dog. I don’t get too excited

    Tim Howard: I’m an old dog. I don’t get too excited

    The Everton and US goalkeeper was such a star at the World Cup that the President phoned to congratulate him... not that he knows what the fuss is all about
    Match of the Day at 50: Show reminds us that even the most revered BBC institution may have a finite lifespan – thanks to the opposition

    Tom Peck on Match of the Day at 50

    The show reminds us that even the most revered BBC institution may have a finite lifespan – thanks to the opposition