Wealth Check: Time out to raise a family so the savings must go to work


The patient

Time off work to raise a family has left Emma Bagnall, 42, anxious about her finances. Emma, from Highbury, north London, is a graphic designer but has not worked since May last year. In place of a salary, she receives 1,000 from her husband every month. This sum is used to provide for their two children, Jonas, six, and Albie, three, and pay household bills.

"I was contributing to my own savings accounts and pension plans regularly, but stopped when the children came along," she says. "I hope to pay into them again soon as I think it's important to have a separate pot of savings to your partner."

So far, she has built up a good sum in various places, with 22,000 in an Icesave instant access account paying 6.3 per cent. She also has 400 in an individual savings account (ISA) with Chelsea Building Society at 5.35 per cent.

As well as cash savings, she holds some equity investments, with 5,600 in a with-profits bond at Scottish Widows. But this has proved a poor performer, as her original investment was 5,000 eight years ago. In contrast, she put 7,000 in the Jupiter Income Trust five years ago, which has soared in value to 11,900 and is wrapped in an ISA.

Fortunately, Emma has no debt and benefits from living in a mortgage-free home. The family's four-bed house was bought in February 1999 for 335,000 and is currently worth around 700,000.

She also has several separate pension plans from previous employment.

"I feel I have so many bits of pensions everywhere," she says. "And I worry that I don't understand the plans or their performance."

She has 12,200 in a Norwich Union stakeholder through an old employer, along with 27,760 in a personal pension with HSBC. She also has a total of 47,500 in three separate Friends Provident personal plans, which she has held since the early 1990s.

Emma has no protection policies in place.

The cure

Erratic working lives, including time out to raise a family, often leave women struggling to set aside long-term savings consistently. But Emma is in a stable financial position and our panel of independent financial advisers (IFAs) stress that, with a bit of tinkering, her portfolio should produce better returns.

Savings/investments

Emma should ensure her investments are as tax-efficient as possible. When she can, she should use her annual tax-free ISA allowance of either 3,000 for a cash account or 7,000 for an equity ISA (3,600 and 7,200 respectively from next April).

"She should transfer money from the Icesave account to use this year's ISA allowance," says Caroline Hawkesley of IFA Evolve Financial Planning.

Some of her cash savings could be drip-fed into a unit trust to plan for any school fees, adds IFA Matthew Woodbridge from Chelsea Financial Services.

Emma's with-profits bond has not even kept pace with inflation. Moving this money would be wise, so long as she doesn't suffer a hefty exit penalty.

Retirement

Pooling her pensions will make them more cost-effective, agree the advisers. As a possible home, Mr Woodbridge recommends a self-invested personal pension from fund supermarket Cofunds. "Housing it all under one roof will also make it easy to monitor performance and switch to less risky funds as she nears retirement," he says.

But before transferring the money, she should check if this means giving up any guarantees. She should also watch out for punitive exit fees, warns Colin Rothery of IFA Throgmorton Financial Services.

Protection

With two young children, life cover is essential if either Emma or her husband were to die, says Mr Rothery. A whole-of-life policy, paying out a lump sum on death, can be put into trust so any proceeds are outside their estate for inheritance tax purposes.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

PROMOTED VIDEO
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Compliance Assistant

    £13000 per annum: Recruitment Genius: This Pension Specialist was established ...

    Ashdown Group: Market Research Executive

    £23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

    Recruitment Genius: Technical Report Writer

    £25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...

    MBDA UK Ltd: Indirect Procurement Category Manager

    Competitive salary & benefits!: MBDA UK Ltd: MBDA UK LTD Indirect Procurement...

    Day In a Page

    Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

    Isis hostage crisis

    The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
    Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

    Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

    Maverick artist Grayson Perry backs our campaign
    Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

    The runaway buccaneers and the ship full of gold

    Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
    Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

    Assisted Dying Bill: 'I want control of my life'

    This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
    Move over, kale - cabbage is the new rising star

    Cabbage is king again

    Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
    11 best winter skin treats

    Give your moisturiser a helping hand: 11 best winter skin treats

    Get an extra boost of nourishment from one of these hard-working products
    Frank Warren column: No cigar, but pots of money: here come the Cubans

    Frank Warren's Ringside

    No cigar, but pots of money: here come the Cubans
    Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

    Isis stands strong as its numerous enemies fail to find a common plan to defeat it

    The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
    Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

    Virtual reality: Seeing is believing

    Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
    Homeless Veterans appeal: MP says Coalition ‘not doing enough’

    Homeless Veterans appeal

    MP says Coalition ‘not doing enough’ to help
    Larry David, Steve Coogan and other comedians share stories of depression in new documentary

    Comedians share stories of depression

    The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
    Has The Archers lost the plot with it's spicy storylines?

    Has The Archers lost the plot?

    A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
    English Heritage adds 14 post-war office buildings to its protected lists

    14 office buildings added to protected lists

    Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
    Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

    Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

    Scientists unearthed the cranial fragments from Manot Cave in West Galilee
    World War Z author Max Brooks honours WW1's Harlem Hellfighters in new graphic novel

    Max Brooks honours Harlem Hellfighters

    The author talks about race, legacy and his Will Smith film option to Tim Walker