Wealth Check: 'Should I invest in property or my pension?'

Marcie Nolan, 26, has a savings pot that she regularly contributes to, a pension, and no debts. But she is tempted by the world of property investment. "I have been working as a graphic designer for the past four years and am now thinking about investing in property," Marcie says. "But I don't know if I would be better off staying in rented accommodation and putting more money into my pension."

Three independent financial advisers help Marcie make a decision this week: Christopher Wicks of N-Trust Limited, Mel Kenny of Radcliffe & Newlands, and Aj Somal of Positive Solutions.

Case notes
* Salary: Marcie earns between £30,000 and £40,000 a year.
* Monthly outgoings: She spends around £1,500 a month on rent, travel, household bill and socialising.
* Savings: Marcie has around £8,000 in premium bonds and saves £300 a month.
* Pension: Marcie puts around £100 into a stakeholder pension.
* Mortgage: £0.
* Debts: £0.

Retirement goals

Marcie has been putting £100 a month into a pension for three years, and hopes to retire on around £25,000 a year. But all three advisers warn that Marcie has work to do on her pension savings.

"Marcie has said that she wants to retire at 55, with an income of £25,000," says Wicks. "But that equates to over 70 per cent of her current earnings, and she would have to make contributions of £1,450 a month."

But if Marcie could defer her retirement until she reaches 65, her goals become more achievable. "If Marcie stops work at 65 and aims for a pension of 50 per cent of her current salary, she would need to contribute only £610 a month," Wicks adds. Marcie should also bear in mind tax relief.

Savings

On the savings front, Marcie is doing well, according to the advisers. "Marcie has a number of options available to her," says Kenny. "Without any debt obligations, now that asset prices are falling Marcie can choose where to invest her money."

Kenny suggests that with her joint goals of a property and a pension, Marcie should consider a more sophisticated strategy. " Marcie should try to set aside a regular amount of money into further cash-based savings and an equity-based ISA, and review her position when she is either ready to buy a property or becomes a higher-rate taxpayer."

Property

In the current economic climate, Marcie will need a deposit of at least 10 to 15 per cent of the purchase price of a property as well as having the funds available to meet other associated costs. The maximum she could borrow would be around four times her income, depending on her credit rating.

"Marcie has grown up with house ownership being the natural next step, but given the current economic situation, we are reminded that renting is not always such a bad thing," says Kenny.

"Marcie could use her £8,000 savings and her anticipated £10,000 inheritance as a deposit for a property purchase," adds Somal. "However, Marcie will need to delay purchasing the property until she receives this inheritance."

For a free financial check-up, write to Wealth Check, The Independent, 191 Marsh Wall, London E14 9RS; or email cash@independent.co.uk