Wealth Check: Three tough decisions for a brighter future

Harriet Warburton, 32, bought her own home in Oxford five years ago. She has a PhD in animal welfare and works for a government research funding agency.

Her financial concerns are, first, that her five-year discount mortgage deal with Halifax expires this month. Should she remortgage and, to what deal? She is attracted by offset mortgages.

Second, Harriet is about to get a pay rise. She'd like to put the extra money (£100 a month) into savings - but what vehicle?

Finally, should Harriet move the pension savings she built up with a previous employer into her current employer's scheme?

We asked three independent advisers for suggestions: Anna Bowes, of Chase de Vere, David Hollingworth, of London & Country Mortgages, and Philippa Gee, of Torquil Clark.

MORTGAGE

Harriet needs to act quickly, says David Hollingworth. From March she will pay Halifax's standard variable rate of 6.5 per cent, a third above the cheapest deals.

Harriet faces two key decisions. The first is whether to remortgage to another discounted variable rate, or go for fixed. The debate is finely balanced - fixing will give certainty, but a discount could prove marginally cheaper if base rates fall.

The second decision is whether to stick with Halifax. Rivals may be cheaper but there will be more costs in switching.

Some lenders offer fee-free mortgages - with a slightly higher interest rate. She must look at charges and interest over the period of the deal. On smaller mortgages, the fee-free option can be good value.

Finally, Hollingworth says offset mortgages, where borrowers hold savings in the same account as the loan to cut the debt and the interest, work well for some. But offset rates tend to be higher, and as Harriet has a small amount of savings, she won't get much benefit.

SAVINGS

Philippa Gee would like Harriet to move her £2,500 savings away from Woolwich, because of its low interest rates. A cash individual savings account (ISA) would be tax-free. Halifax Direct pays 5 per cent.

Gee suggests Northern Rock's Tracker Online for Harriet's pay-rise cash. It pays 5.01 per cent, falling to 4.3 per cent after six months, when Harriet might want to switch. Or, Newcastle Building Society's Online account pays 4.9 per cent a year.

Anna Bowes suggests using the Woolwich cash for emergencies, though she also recommends a cash ISA - or the stock market for part of her savings.

In addition, she suggests Jupiter Merlin Growth, New Star's Tactical, or an ethical fund.

PENSIONS

Bowes thinks Harriet should leave her Universities Scheme pension savings where they are. The scheme is good value and the amount Harriet has is relatively small - unlikely to be worth transferring.

Harriet says she would like to stop work between the ages of 50 and 55 - Bowes thinks this is unrealistic, unless she is able to commit more savings to her pension plans.

PROTECTION

All the advisers are concerned that Harriet has not insured herself properly. Bowes thinks she can save money on her existing life insurance plan, held with her mortgage provider. Gee says Harriet must check whether her employer offers decent benefits in the event of her being unable to work due to ill-health. If not, good income protection or critical illness insurance could be very important.

Case notes

Personal: Harriet is a manager at a government research funding agency.

Income: £24,000 a year.

Property: Owns her own home in Oxford. Discounted-rate deal with Halifax due to end this month.

Pension: Member of scheme at work, deferred member of University Superannuation Scheme.

Savings: £2,500 with Woolwich earning 3.06 per cent. £100 premium bonds.

Monthly expenditure: Disposable income of around £1,500 all spent on bills and general living expenses.