Wealth Check: New husband, new job, new approach to savings
A PA who left the NHS several months after getting married wants a review of her finances to ensure she is on the right track for the future
Sunday 06 February 2011
Karen Regan, 39, from St Ives, Cambridgeshire, is going through some big life changes, having started a new job only three months after getting married. She worked as a hospital secretary for nearly four years before moving to take up a new role as a PA with a risk assessment company, now earning an average salary for PA work.
With so much change going on, Mrs Regan feels that this is an important time to review her finances, and ensure her short- and longer-term savings plans are on track.
Mrs Regan is disciplined about slotting money away, and currently has £5,000 in an E-Saver account with Alliance & Leicester (A&L)/Santander paying 2.75 per cent.
"I tend to use this account to make any significant purchases," she says. "For regular saving, I use the Plus Saver account linked to my A&L/Santander current account. I try to transfer £30 a week, and put this money towards holidays."
Last October, Mrs Regan also started paying into a regular savings account with Norwich & Peterborough building society (N&P) with a rate of 4 per cent. "This account has been opened with a group of old school friends, and we're all putting away some money each month for a mini-break for all of our 40th birthdays," she says. "I also have an N&P Gold classic current account jointly with my husband which is used for paying household bills. This doesn't pay interest, but does give me free overseas debit card transactions."
Her investments include £7,000 in a direct deposit guaranteed capital account with Credit Suisse through A&L and £3,000 in a cash individual savings account (ISA) with the same provider. With both of these accounts, set up in January 2007, there is a guaranteed return of the capital plus the greater of 7 per cent interest or 50 per cent of any growth in the FTSE 100 over the three-year period.
"Both of these are due to mature in March, so I'm keen to know what to do next," she says. "I'd also like to know if I could get a better rate on my savings."
While Mrs Regan had been paying about £80 a month into an NHS pension, this ceased when she left the hospital. "I will be eligible to join the new company's pension scheme after a period of six months," she says. "I've also just taken out a protection policy costing £15.50 per month which will cover me for an extended period of time off work due to accident or illness."
She is in the fortunate position of not having to pay a mortgage, as her husband covers the monthly payments on their four-bedroom detached house; he is on Nationwide building society's standard variable rate of 2.5 per cent and pays about £500 per month.
Mrs Regan also has no debts, loans or credit cards, and while she does have a small overdraft of £400 which she uses from time to time, this is never more than £100.
Our panel of independent financial advisers (IFAs) all commend Mrs Regan for her savings discipline. By forward planning in this way with different accounts for different purposes, she is saving herself the additional cost associated with buying on credit. However, they urge her to review her investments, and focus more on her retirement planning.
Planning for retirement
Jaskarn Pawar from Investor Profile says Mrs Regan is at an age when she should be thinking seriously about her retirement strategy.
"Have a discussion with your husband about your future plans," he says. "Decide what you want to do in retirement, and how much this will cost. You can then begin to plan to save towards this with some specific goals in mind."
Dr Robin Keyte of Towers of Taunton says Mrs Regan's deferred NHS pension is almost certainly best left where it is. "She should set aside monthly savings for six months – equivalent to the pension contributions she would have made – and then, when she joins her new employer's scheme, she should make a lump sum contribution," he says. "If her employer offers to make contributions on her behalf, that's all the better. If it is a money purchase/defined contribution scheme, Karen is still young enough to be able to accept a reasonable amount of risk and investment with exposure to shares – with the aim of gaining long-term returns ahead of inflation."
Dr Keyte says that as there has been little or no growth in the FTSE 100 over the three-year period due to the global recession, the returns on her investments will be based on the 7 per cent interest.
"If Karen is willing to accept some risk when looking for a return, I would suggest she consider allocating some money to a stocks-and-shares ISA into a cautiously managed fund, such as the AXA distribution fund which has good potential to provide future returns ahead of inflation," he says. "Investments like this have lower charges than guaranteed products, and several platforms now offer the ability to invest in this type of fund."
However, before deciding how to reinvest the maturity proceeds, Mrs Regan needs to consider whether her cash emergency fund is sufficient, says Dr Keyte. "This should be equivalent to between three and six months' earnings."
Robert Forbes from Plutus Wealth Management warns that Mrs Regan needs to beware of the effects of inflation on her savings, as she could find her money is losing value in real terms. "For example, the E-Saver account is subject to tax, which means Karen's real interest rate is just 2.2 per cent," he says. "This is way below the current rate of inflation. Karen should put her money into a notice account, or a cash ISA to benefit from tax-free interest.
Mr Pawar points out that Santander is paying 2.85 per cent on its flexible instant access ISA. "Karen could hold her savings in a fixed-rate account for additional interest, but as there is some uncertainty around what will happen to the Bank of England base rate, it might be best to keep her options open with an instant access cash ISA. This will provide an extra savings cushion for emergencies in addition to her E-Saver account."
As Mrs Regan is starting a new job, Mr Pawar suggests she check with her new employer whether she will get benefits such as death-in-service and sick pay. If not, Dr Keyte suggests she should consider income protection.
"For a cost of about £35 per month, this would offer replacement income of £10,000 a year tax free after she had been off work for six months consecutively," he says. "The policy would then pay out until Karen returned to work or retired."
Mr Forbes also urges Mrs Regan to make a will. "After marrying, any will becomes void, so she needs to review this," he says.
Do you need a financial makeover?
Write to Julian Knight at The Independent on Sunday, 2 Derry Street, London W8 5HF / firstname.lastname@example.org
Independent Partners: See how much you could save by switching credit cards. Compare now
Geoffrey Macnab reviews The Desolation of Smaug - the meat in Peter Jackson's Hobbit sandwich
Beatles rush out 'bootleg' album to defy EU copyright law
Harvey Weinstein reveals his secret weapon on-set
Chiwetel Ejiofor and Idris Elba get nods for Best Actor, which no black Brit has ever won
- 1 Nelson Mandela memorial: ‘Bogus’ sign language interpreter made mockery of Barack Obama’s tribute in Soweto
- 2 Mystery of Epping Forest 'big cat' is solved
- 3 French café starts charging extra to rude customers
- 4 Australia: Gay marriage law reversed by high court less than a week after first weddings
- 5 Australia incest case: Severely deformed children found in remote farming community after generations of inbreeding
- < Previous
- Next >
iJobs Money & Business
£40000 - £55000 per annum + Bonus and Benefits: Harrington Starr: Senior Netwo...
£60000 - £100000 per annum + benefits + bonus: Harrington Starr: Senior Busine...
£500 - £550 per day: Cornwallis Elt : Business Systems, Business Analyst, Plat...
£90000 - £110000 per annum: Cornwallis Elt : Solution Architect, Credit Risk, ...
Day In a Page
A two-bedroom cottage with parquet floors, chunky beams and an open fireplace
A Grade II-listed home with six bedrooms, secluded landscaped gardens and views across Hadley Green
A Grade II-listed mansion with two apartments and a cottage, near Gretna Green
A three-bedroom Grade II-listed mews house with vaulted ceilings and roof garden
A spacious Grade II-listed family home with annexe and equestrian facilities among four acres of land in Itchingfield
A four-bedroom home with exposed brick walls and open fires in the picturesque village of Northill
A Grade II-listed property with five bedrooms and unique tower, overlooking Hastings Old Town
A charming five-bedroom detached family home, set within half an acre in Kew
A two-bedroom maisonette set on the top two floors of a period building, close to Kentish Town Tube.
Take advantage of the extra space provided by former stables and outbuildings at this five-bedroom farmhouse.
This three-bedroom Victorian terrace is near to Queen’s Road Peckham station, Nunhead station.
A five-bedroom modern house with terrace, swimming pool, Zen treehouse and large carp pond
An unexpected gem with four bedrooms, remarkable vaulted reception and a galleried study area
A five-bedroom house in one of Lymington's most sought after tree lined avenues, moments from the marinas and sailing clubs
A grand early 19th century B&B close to the historic harbour, with four en suite bedrooms
A four-bedroom, 17th century home with walled gardens, a landscaped terrace, cellar and open fires
A six-bedroom house with five bathrooms and four reception rooms spread over 4,000sq ft of luxury living space
A stunning three double-bedroom apartment with two decked terraces in the exclusive gated community, Bromyard House
A 10-bedroom period, family home amid beautiful surroundings in the centre of the Wentworth Estate in Longcross village
A stylish three-bedroom apartment with two bathrooms and private landscaped garden, moments from Fitzroy Square
A Grade II-listed Elizabethan barn with landscaped gardens, exposed elm beams and four bedrooms, all with lovely views
A six-bedroom family home, dating back to 1280 with four reception rooms, barn, swimming pool and tennis courts in Harwell
A spacious two-bedroom flat, refurbished to a very high standard with private landscaped garden, close to Kentish Town station
An exceptional two-bedroom apartment with balcony and underground parking in the centre of Richmond
A one-bedroom, luxury, duplex apartment in the grand landmark building, Imperial Hall
Run a fabulous boutique shop, live above it in a one-bedroom flat and let a second one-bedroom flat that comes part and parcel
A Grade-II listed, thatched cottage in Hundleby village, with five bedrooms, a coach house and three and a half acres
A spacious two-bedroom flat in the heart of Hoxton Square with wooden floors and roof terrace
A five-bedroom family home with stunning pool and gym complex set among two acres of land
A six-bedroom period house with heated swimming pool and a separate two-bedroom annexe cottage in Townlake, £795,000
A spacious and contemporary two-bedroom flat arranged over three floors, with garden patio close to St George Square, £600,000
A one-bedroom flat in a beautiful Regency building opposite the beach in Kemp Town, £190,000
A two-bedroom flat with London skyline views close to Surrey Quays. £395,000.
A seven-storey tower with three bedrooms and a stunning roof terrace. Guide price: £850,000.
A 16-bedroom country pile with nine reception rooms, four self-contained flats and a 13th century Peel Tower. £850,000.
A classic six-bedroom Victorian Manse house 10 miles from Edinburgh. £495,000.
John Lennon's childhood home in Liverpool to be sold at auction. Guide price: £150,000-£250,000.
A six-bedroom detached period property with secluded gardens, ample parking and a double garage in Rye, £675,000.
A large split-level property with three double-bedrooms and roof terrace, close to Crouch End Broadway, £625,000.
A charming barn conversion in the picturesque Cotswold village of Ilmington with three bedrooms, a detached garage, workshop and beautifully manicured gardens £675,000.