Wealth Check: Ruth and Mike must capitalise on their strengths
With no mortgage and decent savings, the couple, with two children, must focus on improving their position
Saturday 21 December 2013
Ruth and Mike Holwill are keen to build up savings for short-term needs and to put their children through university in a few years' time. They live in Leeds with Euan, 13, and Freya, 10. Ruth, 43, has worked as a pharmacist for a major chemist for 22 years, but is currently working part-time and earning around £17,000 (plus bonus). Mike works as a senior charge nurse, earning around £36,000.
"I started working part-time in February 2001 after having Euan," says Ruth. "I currently work 14 hours per week on a flexible working-parent contract meaning I work more during term time and less in the school holidays. I have no plans to work full-time again, but do expect to increase my hours to around 25 per week in seven years' time when Freya finishes school."
The couple have been disciplined about building up their savings, and have amassed around £13,000 in two fixed-rate cash individual savings accounts (Isas) with Kent Reliance building society.
"The money is locked in until April 2014, but most of it will be spent on a new kitchen," says Ruth. "Once we've paid for this, I'll feel quite stressed until I can start building our easy access savings again."
Both Ruth and Mike pay into fixed-term regular investment plans run by life assurance companies.
"I pay £50 a month into a plan with Scottish Widows and the current value is £9,000," says Ruth. Mike pays £50 a month into a plan with Friends Provident and the current value is £5,000."
Both plans were opened in February 1999 and are due to run for 20 years; they will mature in 2019.
The Holwills bought their three-bed semi in 2002 for £155,000. They then added a utility room in 2005 at a cost of £15,000. The couple repaid their mortgage two years ago.
Ruth pays into a company pension and has done so since starting work at the firm. "This was a final salary pension until four years ago," she says. "I now pay in 12 per cent of salary, and the company matches this. Mike pays around £250 a month into an NHS pension."
The couple are in the very fortunate position of having no debts.
Both Ruth and Mike have life insurance policies with critical insurance cover in place until their children are 21. These policies are with CGU and Scottish Provident.
Our panel of independent financial advisers (IFAs) commend Ruth and Mike on having paid off their mortgage alongside raising a family. They also agree the couple are in an excellent position, with no debts and good pension provision. However, they add that building cash savings should remain a priority, and that investing into stocks-and-shares Isas could be of long-term benefit.
Increase cash savings
Patrick Connolly from Chase de Vere says the couple are doing the right thing by using their cash Isas for savings, as all interest is tax-free.
"But as they will be using most of their cash savings to buy a new kitchen, they need to make a concerted effort to build up funds again," he says. "They should continue to use cash Isas – making the most of the increased allowance of £5,940 from the start of the new tax year."
Claire Walsh from Pavilion Financial Services adds that it's vital to have cash savings to cater for any emergencies or requirements.
"As a guide, people should look to hold between three and six months' spending money in an accessible cash fund," she says.
Build on existing pension savings
Both Ruth and Mike have good-quality pension provision, and should continue to build on this.
"Mike is a member of the NHS scheme which provides excellent benefits, guaranteed by the Government," says Mr Connolly.
He adds that Ruth did well to join the pension scheme when she started work. "While the final salary pension is closed, her employer still matches payments – so Ruth should continue to save into it."
Review regular savings plan
Mr Connolly warns that it can be difficult to get to grips with exactly how fixed-term regular investment plans work – and what benefits the holder is likely to get in the future.
"Most with-profits policies are now paying very low bonuses – or none at all," he says. "The Holwills need to get an idea of how much they might receive at maturity. "
Danny Cox from Hargreaves Lansdown agrees that these types of plan are not particularly tax efficient and can be expensive. "They are invested in with-profit funds which have had a torrid time since 2009, and the long-term prospects for decent returns remains poor," he says. "In my view, their savings should be diverted in a different way."
Invest in stocks-and-shares Isas
For any future regular investments, Mr Cox recommends looking at stocks-and-shares Isas.
"The costs are likely to be lower, Isas are more tax-efficient, and there are much better fund choices," he says. "Many of these are cheaper than their current plan – meaning the returns should be better."
Do you need a financial makeover?
Write to Julian Knight at:
The Independent on Sunday, 2 Derry Street, London W8 5HF
Diving in at the deep end is no excuse for shirking the style stakes
Where should I invest my savings?
'Scrap the trap': calls for change grow as banks are told to play fair with loyal savers
Bargain Hunter: Eurostar offers child fares for £1 each way to Paris, Brussels and Lille
Relaxed pensions rules: Guide to what they mean to you
Moment of truth for payday lenders: Watchdog plans to curb cost of short-term loans
- 2 Why I'm on the brink of burning my Israeli passport
- 4 War is war: Why I stand with Israel
- 5 Blackest is the new black: Scientists have developed a material so dark that you can't see it...
Sustained immigration has not harmed Britons' employment, say government advisers
War is war: Why I stand with Israel
Even when it brutalises one of its own teenage citizens, America is helpless against Israel
Socialist Worker called to apologise over ‘vile’ article saying Eton schoolboy Horatio Chapple's death is ‘reason to save the polar bears’
Emergency data law: David Cameron plots to bring back snoopers’ charter
NUT strike: David Cameron announces crackdown on strike action ahead of mass industrial action
iJobs Money & Business
£70000 per annum: Harrington Starr: Information Security Manager (ISO 27001, A...
£75000 - £85000 per annum + ex bens: Deerfoot IT Resources Limited: Biztalk Te...
£60000 per annum: Harrington Starr: Trade Desk Specialist (FIX, Linux, Windows...
£35000 per annum: Harrington Starr: Service Desk Analyst (Windows, Active Dire...
Day In a Page
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000
A 17th century four-bedroom house, with open fireplaces, cellar and pool, £600,000
A three-bedroom, coach house with luxury open-plan living space and contemporary breakfast bar
A newly refurbished one-bedroom flat in the heart of Mayfair, close to Grosvenor Square