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 ...
Sunday 03 February 2013
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.
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."
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."
Debt in Britain: Numbers seeking help on how to cope with mounting bills goes up by more than half in three years
General election 2015: David Cameron's promise brings uncertainty to investors
Have a happy new financial year
Simon Read: 'It went below the radar but you could be eligible for a tax break on your savings'
Women to lose benefits from contracted-out pension scheme
- 1 Katie Hopkins attacked me on Twitter — so I reported her to the police for inciting racial hatred
- 2 Google April Fools': company unveils backwards search engine and huggable digital assistant
- 3 I might be an MP, but that doesn't stop me fighting sexism with my breasts
- 4 April Fools' Day 2015: The best hoax news stories from around the internet
- 5 Gamers confess the worst things they've done in The Sims
Street preacher quoting from the Bible fined for calling homosexuality an 'abomination'
Katie Hopkins attacked me on Twitter — so I reported her to the police for inciting racial hatred
Woman filmed launching racist tirade against men on the Tube for speaking in 'own lingo'
David Cameron calls Labour 'hopeless, sneering socialists' while announcing 7-day NHS plans
Revealed: Putin's army of pro-Kremlin bloggers
Katie Hopkins reported to the police for race hatred by Labour MP Simon Danczuk after tweet about Pakistani men
iJobs Money & Business
£20000 per annum + commission: SThree: Sthree have an exciting opportunity for...
£18000 - £32000 per annum: Recruitment Genius: A Telesales Executive is requir...
£45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, glo...
£50,000 - £55,000: Neil Pavier: Are you a professionally qualified commercial ...
Day In a Page
This four-bedroom detached home comes with grounds that span to approximately 2.5 acres, as well as two large patio areas and a double garage.
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
A boutique mews house, set around a central courtyard, with three bedrooms and a private roof terrace
A four-bedroom farm-conversion with three bathrooms and two reception rooms
A two-bedroom detached house with ensuite bathrooms and a sun-drenched decked terrace, £750,000
A modern and spacious two-bedroom, penthouse flat with two bathrooms in a prestigious development
A beautifully renovated five-bedroom terrace with three reception rooms and a courtyard garden, £700,000
A four-bedroom period house which has been extended to provide almost 2,500sq ft of living space, £675,000
A pretty three-bedroom Georgian home with a 22ft drawing room and a master suite with a balcony, £525,000
A substanstial family home with five bedrooms and landscaped gardens in the much sought-after Branksome Park area
A well-presented three-bedroom house with front and rear gardens, close to White City station, £475,000
A handsome five-bedroom house in a sought-after location close to the city centre
A five-bedroom country home with valley views, equestrian stables and 27 acres of land, £725,000
A six-bedroom farm house with separate, detached cottages and 371 acres of land
A two-bedroom cottage with parquet floors, chunky beams and an open fireplace
A three-bedrrom flat with 2,733sq feet of living space, a beautiful private garden and 15 acres of communal grounds
A four-bedroom chalet bungalow with three bathrooms and a spacious garden, £525,000