Wealth Check: The researcher who keeps her eye on the science of saving

Opthalmic researcher from Bulgaria wants to stay working in Britain and wishes to know exactly what she should do with her money

When Christina Chakarova was studying for a master's degree in science at Sofia University in the late 1980s, she never imagined she might one day live and work in London. That was before the Berlin Wall came down and the Soviet Union broke apart.

"When I was at university, Bulgaria was a communist country and it was not possible for us to work abroad," she says. "But after the wall came down in 1989 I realised the opportunity was there for me to travel and work in west- ern Europe."

Ms Chakarova, now 32, moved to Germany on a scholarship to do a PhD in molecular genetics. In 2000, she won a senior research fellowship at University College London's Institute of Ophthalmology.

She is in a team examining Retinitis pigmentosa, a disease of the retina. "I always wanted to work in human molecular genetics. I want to use my skills to help people directly rather than being involved in theoretical scien- tific discoveries."

Last January, Ms Chakarova bought a one-bedroomed flat in Finchley, north London, with a £165,000 variable rate Barclays mortgage, which charges 3.54 per cent at present.

"I feel much happier here than anywhere else," she says. "London has people from all over the world. I get to meet so many interesting ones. Many people I know say it's very expensive but I don't find it so I can't say money is a priority for me.

Ms Chakarova has one grouse. "The Underground is the worst I have seen," she says. "It often breaks down and sometimes I don't feel safe on it." She is not interested in getting a car, since she has nowhere to park and thinks there would be too many traffic jams to contend with. She has a few thousand pounds saved and has been a member of the university superannuation pension scheme since she arrived in Britain.

Next year, Ms Chakarova intends to apply for permanent residency in Britain. She has a four-year contract for her research fellowship at UCL and after that she can work elsewhere.

But Ms Chakarova is keen to stay where she is. "I love my work and I would like to continue as a scientist in eye molecular genetics," she says, "UCL's institute is a wonder- ful place to work and realise your ideas."

Ms Chakarova travels to Bulgaria twice a year, to the small town of Shoumen, near the Black Sea, where she grew up and where her parents still live. One of her goals is to help young science students from Bulgaria to gain research experience in Britain.

We put her case to Jackie Greenwood, senior financial adviser at Rickman Tooze, Steve Martell, director of Martell Investment Management and Mike Metcalf, director of The Metcalf IFA Consultancy.


Status: Single;

Occupation: Senior research fellow, Department of Molecular Genetics at the Institute of Ophthalmology, University College London

Education: MSc at Sofia University, Bulgaria; PhD in molecular genetics, University of Greifswald, Germany;

Education: MSc at Sofia University, Bulgaria; PhD in molecular genetics, University of Greifswald, Germany;

Salary: Middle-rate taxpayer;

Debts: £165,000 variable rate Barclays mortgage (presently 3.54 per cent);

Property: One-bedroom flat in Finchley, north London;

Pension: University superannuation scheme;

Motoring: No car.

Solution 1: Mortgage

Mr Martell says Ms Chakarova has a good deal on her mortgage interest rate at present, but when this discount stops her payments will increase. The increase in the bank base rate is feeding through into mortgage interest rates and most analysts expect further rises within months.

The rates have been at 40-year lows and even with the expected increases they will still be well below the levels of the 1980s and early 1990s. But if the mortgage lending rate rises by just 1 per cent, Ms Chakarova's outgoings will rise by £137 a month.

Ms Greenwood says that, a month before her discount period expires, Ms Chakarova should check for redemption penalties, and shop around for a remortgage offer. Many people may well be paying much more interest than necessary.

A mortgage of £165,000 is a large commitment, on Ms Chakarova's salary. But she is comfortable with the level of the monthly payments.

Mr Metcalf says, based on normal lending criteria, Ms Chakarova is borrowing a high multiple of her earnings. This would normally make a lender nervous but she is young, single and has few other expenses and no debts. But Ms Chakarova should consider moving her mortgage to a fixed or capped rate. This would give her security in any rates rise.

Solution 2: Savings

Ms Greenwood says although Ms Chakarova is not a permanent UK resident, she will be deemed to be ordinarily resident for tax purposes. This is because she is planning to stay for more than three years. It also means she is eligible to invest in Isas.

Mr Martell says Ms Chakarova should transfer her savings into a tax-free mini-cash Isa. Intelligent Finance is offering instant access at 4.35 per cent. Since Ms Chakarova's existing level of savings will probably use up her mini-cash Isa allowance, she may like to consider saving up to £250 a month from her disposable income in a mini-stocks-and- shares Isa as well. She can spread her risk by arranging a plan via a fund supermarket, enabling her to invest in a range of them.

Solution 3: Pension

Mr Martell says the university superannuation scheme has an excellent level of pension benefits with a pension of one eightieth of final salary per year of service plus a one-off lump sum of three times the amount of the pension payable.

Both benefits are normally payable from age 65. There is also a lump sum death benefit of three times annual salary and a dependant's pension. She would also be entitled to an ill-health pension benefit in certain circumstances. She has to contribute 6.35 per cent of salary.

Mr Metcalf says Ms Chakarova might use some disposable income to boost her pension. She could invest up to £234 a month in a personal pension and get the taxman to chip in a further £66 in tax relief. If she does this until 60 she could add £200,000 to her pension fund.

Ms Greenwood says Ms Chakarova could invest up to £3,600 per year in a stakeholder or personal pension. this will entitle her to tax relief at her highest rate on her contributions. This actually means that for every £100 she invests into a pension plan, it will cost her only £78.

Solution 4: Residency

Mr Martell says Ms Chakarova will be able to apply for what is known as "settled status" after four years of UK residency. In effect, this will entitle her to permanent residency in the UK. After five years she can apply for a certificate of naturalisation which will enable her to become a British citizen and apply for a UK passport. With British citizenship she will be free to leave and re-enter the UK as she wishes and retain her UK passport. Having a UK passport will make travel considerably easier.

Ms Greenwood says as Ms Chakarova is already deemed resident for tax purposes, permanent residency is unlikely to make many changes to her financial planning.

One thing she should remember is that although she will obtain permanent residency, she will not be deemed to be UK-domiciled. Domicile is more difficult to change, and has little to do with country of residence, which is usually considered to be the birthplace.

A person would be deemed to be UK-domiciled if they lived in the UK for 17 out of 20 years. This has little impact on Ms Chakarova's present circumstances, they may change. Domicile can have an impact on inheritance tax.

If you would like to be given a financial health check-up, write to: Wealth Check, 'The Independent', 191 Marsh Wall, London E14 9RS, or e-mail cash@independent.co.uk.