Wealth Check: 'We need more room for our growing family'

A married police officer with three young children is in need of a bigger home – and that means he's in need of a new savings strategy ...

Police Constable Daniele Lapi is keen to save more so his family can move into a bigger house. At present, the 40-year-old lives in a three-bed property in Bishopbriggs, Glasgow, with his wife, Carol Anne, and their three young children.

The couple bought their home 10 years ago for £96,000, and have a repayment mortgage for £56,000 with Santander. "I took out a tracker and got a good deal which tracks the base rate by 0.75 per cent," says Daniele, who has been a PC for 16 years and earns around £36,600 a year. "We'd like to move into a larger property with four bedrooms for our three growing children," he says. "We'd probably need to spend around £250,000 in the area."

Daniele has some savings, but wants to build on them. "I have around £1,800 with Yorkshire Building Society, £800 with Santander, and £100 with the Halifax," he says. "I also have £450 invested in the Virgin UK Index Tracker – an investment individual savings account (ISA) split evenly between the FTSE and bonds. I set this up five months ago.

"In addition, I've got six small regular savings policies with the Police Mutual totalling £130 a month. These are all at different levels of maturity."

Daniele recognises he has a lot of saving to do, "but I'm very disciplined about paying off my credit cards in full each month," he says. "I'm also savvy with my spending and buy through Quidco when I can, to benefit from cashback."

As a police officer, Daniele gets a good pension through his employer. "I pay in £400 a month which accounts for around 13 per cent of my wage," he says.

He also pays £10 for protection policies through Direct Line, and £30 for a work-protection scheme.

 

Cure

Our panel of independent financial advisers agree it's positive Daniele has built up cash savings and has insurance arrangements, but adds that there's more he could be doing.

 

Build up savings

Daniele should begin by building his short-term cash savings towards a target of at least three months' net income, according to David Brunning of Bellpenny Financial Planner. "This represents a solid emergency reserve should he have unexpected expenses," he says.

Patrick Connolly from AWD Chase de Vere suggests Daniele gets further into the savings habit and sets up a direct debit from his current account into a savings account. "He should also aim to hold his cash savings within a cash ISA where all interest earned is tax-free," he says. "The current allowance is £5,640."

Mark Osland from Formula Limited recommends that both Daniele and Carol Anne open cash ISAs and save as much as they can into those accounts towards a new property.

"This will get them used to the increased outgoings they will face when they move house and have higher monthly mortgage repayments," he says. "It will also mean they build a considerable savings pot over a fairly short timescale."

 

Review investments

While Daniele has made a good start by using some of his stocks-and-shares Isa allowance, his choice of investments should be reviewed, according to Mr Connolly.

"The Virgin UK Index Tracker fund is expensive compared with similar funds," he says. "Daniele also needs to think about what will be gained from such a small investment into bonds. He should look to use more of his allowance – and rethink where he is investing."

Mr Brunning agrees Daniele should focus on his short-term savings. "While his investment Isa could be a platform for building longer-term savings, he would need to leave any money for at least five years, given the volatility associated with any equity-based investment," he adds.

Mr Connolly also points out that the 10-year savings policies investing into the Police Mutual with-profits funds are investments which typically have high charges.

"While they can provide guaranteed returns, the performance is pretty mediocre," he adds. "I would advise against setting up any new policies – but it may be best to keep the existing ones until they reach maturity. The proceeds of these can be used to increase cash savings, invest in stock-and-shares Isas, or to contribute an additional amount to a deposit on the new property."

 

Plan ahead for property move

With the base rate at a historical low of 0.5 per cent, Daniele is on a manageable mortgage with a very competitive rate, according to Mr Osland. "Daniele could make the most of current low rates by making overpayments," he says. "This would help him pay down his mortgage, and reduce the debt more quickly."

Mr Brunning adds that the ease with which the family can move will depend on the value of their current home – and the amount of equity they have in it. "Estimates from property portal Zoopla suggest Daniele's home is worth around £160,000," he says.

"Given that he has around £104,000 equity in his home, he will need to raise around £146,000 to fund a house costing £250,000 – plus the stamp duty, and legal and moving costs. A lender would need to consider the family's overall income and expenditure to ensure the couple could afford the loan."

Mr Osland adds that while Daniele could ask if the mortgage can be moved, or ported, to a new property, it is likely the top-up will be at a higher rate. He suggests Daniele consider remortgaging to a longer-term, fixed-rate deal. "For example, Yorkshire Building Society is currently offering a five-year fix at just 2.99 per cent," he says. "While the increased cost may be painful initially, it could pay off over the longer term."

 

Maintain pension saving

Daniele is fortunate to be in the Police Pension Scheme, according to Mr Connolly. "This is top-quality, which, despite some proposed changes, will provide valuable benefits that are government guaranteed," he says. "These would be very expensive to replicate outside of the public service. This scheme will provide the bedrock of Daniele's retirement planning arrangements, and he should continue to pay into it."

 

Consider extra protection cover

Mr Brunning says that with a larger mortgage, the family will need to look to increase life cover, and potentially also add critical illness cover for Carol Anne.

"While Daniele is confident the benefits offered with his job mean he has sufficient cover in place, he should double-check this," he says. "I would also encourage him to review the family's existing insurance provisions rather than simply topping up existing arrangements."

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Arts and Entertainment
Gregg Wallace in Summer's Supermarket Secrets
tv All of this year's 15 contestants have now been named
Arts and Entertainment
Inside the gallery at Frederick Bremer School in Walthamstow
tvSimon Usborne goes behind-the-scenes to watch the latest series
Life and Style
A picture taken on January 12, 2011 shows sex shops at the Paris district of Pigalle.
newsThe industry's trade body issued the moratorium on Friday
News
Winchester College Football (universally known as Winkies) is designed to make athletic skill all but irrelevant
Life...arcane public school games explained
PROMOTED VIDEO
Arts and Entertainment
Could we see Iain back in the Bake Off tent next week?
tv Contestant teased Newsnight viewers on potential reappearance
Life and Style
Silvia says of her famous creation: 'I never stopped wearing it. Because I like to wear things when they are off the radar'
fashionThe fashion house celebrated fifteen years of the punchy pouch with a weighty tome
News
i100(and it's got nothing to do with the Great British Bake Off)
News
Angelina Jolie with her father Jon Voight
peopleAsked whether he was upset not to be invited, he responded by saying he was busy with the Emmy Awards
News
Bill Kerr has died aged 92
peopleBill Kerr appeared in Hancock’s Half Hour and later worked alongside Spike Milligan and Peter Sellers
News
news It's not just the world that's a mess at the moment...
Sport
footballPremiership preview: All the talking points ahead of this weekend's matches
News
Keira Knightley poses topless for a special September The Photographer's issue of Interview Magazine, out now
people
Voices
The Ukip leader has consistently refused to be drawn on where he would mount an attempt to secure a parliamentary seat
voicesNigel Farage: Those who predicted we would lose momentum heading into the 2015 election are going to have to think again
Arts and Entertainment
Cara Delevingne made her acting debut in Anna Karenina in 2012
film Cara Delevingne 'in talks' to star in Zoolander sequel
News
i100
Sport
Mario Balotelli pictured in his Liverpool shirt for the first time
football
Life and Style
tech
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

    Data Scientist (SQL,Data mining, data modelling, PHD, AI)

    £50000 - £80000 per annum + benefits+bonus+package: Harrington Starr: Data Sci...

    SAS Business Analyst - Credit Risk - Retail Banking

    £450 - £500 per day: Orgtel: SAS Business Analyst, London, Banking, Credit Ris...

    Project Manager - Pensions

    £32000 - £38000 Per Annum Bonus, Life Insurance + Other Benefits: Clearwater P...

    KYC Analyst, Birmingham - £200-£250 p/d

    £200 - £250 per day + competitive: Orgtel: KYC Analyst, Key Banking Client, Bi...

    Day In a Page

    Ukraine crisis: The phoney war is over as Russian troops and armour pour across the border

    The phoney war is over

    Russian troops and armour pour into Ukraine
    Potatoes could be off the menu as crop pests threaten UK

    Potatoes could be off the menu as crop pests threaten UK

    The world’s entire food system is under attack - and Britain is most at risk, according to a new study
    Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

    Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

    Seoul's plastic surgery industry is booming thanks to the popularity of the K-Pop look
    From Mozart to Orson Welles: Creative geniuses who peaked too soon

    Creative geniuses who peaked too soon

    After the death of Sandy Wilson, 90, who wrote his only hit musical in his twenties, John Walsh wonders what it's like to peak too soon and go on to live a life more ordinary
    Caught in the crossfire of a cyber Cold War

    Caught in the crossfire of a cyber Cold War

    Fears are mounting that Vladimir Putin has instructed hackers to target banks like JP Morgan
    Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years

    Salomé: A head for seduction

    Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years. Now audiences can meet the Biblical femme fatale in two new stage and screen projects
    From Bram Stoker to Stanley Kubrick, the British Library's latest exhibition celebrates all things Gothic

    British Library celebrates all things Gothic

    Forthcoming exhibition Terror and Wonder: The Gothic Imagination will be the UK's largest ever celebration of Gothic literature
    The Hard Rock Café's owners are embroiled in a bitter legal dispute - but is the restaurant chain worth fighting for?

    Is the Hard Rock Café worth fighting for?

    The restaurant chain's owners are currently embroiled in a bitter legal dispute
    Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival

    In search of Caribbean soul food

    Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival
    11 best face powders

    11 best face powders

    Sweep away shiny skin with our pick of the best pressed and loose powder bases
    England vs Norway: Roy Hodgson's hands tied by exploding top flight

    Roy Hodgson's hands tied by exploding top flight

    Lack of Englishmen at leading Premier League clubs leaves manager hamstrung
    Angel Di Maria and Cristiano Ronaldo: A tale of two Manchester United No 7s

    Di Maria and Ronaldo: A tale of two Manchester United No 7s

    They both inherited the iconic shirt at Old Trafford, but the £59.7m new boy is joining a club in a very different state
    Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

    Robert Fisk: No victory for Israel despite weeks of devastation

    Palestinians have won: they are still in Gaza, and Hamas is still there
    Mary Beard writes character reference for Twitter troll who called her a 'slut'

    Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

    The Cambridge University classicist even wrote the student a character reference
    America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

    America’s new apartheid

    Prosperous white districts are choosing to break away from black cities and go it alone