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