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
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

    Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

    Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

    Selby Jennings: Quantitative Research | Equity | New York

    Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...

    Selby Jennings: SVP Model Validation

    Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

    Selby Jennings: Oil Operations

    Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

    Day In a Page

    A timely reminder of the bloody anniversary we all forgot

    A timely reminder of the bloody anniversary we all forgot

    Who remembers that this week we enter the 150th anniversary year of the end of the American Civil War, asks Robert Fisk
    Homeless Veterans appeal: Former soldiers pay their respects to a friend who also served

    Homeless Veterans appeal

    Former soldiers pay their respects to a friend who also served
    Downfall of Dustin 'Screech' Diamond, the 'Saved By The Bell' star charged with bar stabbing

    Scarred by the bell

    The downfall of the TV star charged with bar stabbing
    Why 2014 was a year of technological let-downs

    Why 2014 was a year of technological let-downs

    Security breaches and overhyped start-ups dominated a year in which very little changed (save the size of your phone)
    Cuba's golf revolution: But will the revolutionary nation take 'bourgeois' game to its heart?

    Will revolutionary Cuba take 'bourgeois' golf to its heart?

    Fidel Castro ridiculed the game – but now investment in leisure resort projects is welcome
    The Locked Room Mysteries: As a new collection of the genre’s best is published, its editor Otto Penzler explains the rules of engagement

    The Locked Room Mysteries

    As a new collection of the genre’s best is published, its editor explains the rules of engagement
    Amy Adams on playing painter Margaret Keane in Tim Burton's Big Eyes

    How I made myself Keane

    Amy Adams hadn’t wanted to take the role of artist Margaret Keane, because she’d had enough of playing victims. But then she had a daughter, and saw the painter in a new light
    Ed Richards: Parting view of Ofcom chief. . . we hate jokes on the disabled

    Parting view of Ofcom chief... we hate jokes on the disabled

    Bad language once got TV viewers irate, inciting calls to broadcasting switchboards. But now there is a worse offender, says retiring head of the media watchdog, Ed Richards
    A look back at fashion in 2014: Wear in review

    Wear in review

    A look back at fashion in 2014
    Ian Herbert: My 10 hopes for sport in 2015. Might just one of them happen?

    Ian Herbert: My 10 hopes for sport in 2015

    Might just one of them happen?
    War with Isis: The West needs more than a White Knight

    The West needs more than a White Knight

    Despite billions spent on weapons, the US has not been able to counter Isis's gruesome tactics, says Patrick Cockburn
    Return to Helmand: Private Davey Graham recalls the day he was shot by the Taliban

    'The day I was shot by the Taliban'

    Private Davey Graham was shot five times during an ambush in 2007 - it was the first, controversial photograph to show the dangers our soldiers faced in Helmand province
    Revealed: the best and worst airlines for delays

    Revealed: the best and worst airlines for delays

    Many flyers are failing to claim compensation to which they are entitled, a new survey has found
    The stories that defined 2014: From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions

    The stories that defined 2014

    From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions
    Stoke-on-Trent becomes first British city to be classified as 'disaster resilient' by the United Nations

    Disaster looming? Now you know where to head...

    Which British city has become the first to be awarded special 'resilience' status by the UN?