Wealth Check: 'We want to save for tomorrow and live for today'
Sunday 06 May 2007
The problem:: Stretching the cash to enjoy family life
With three young children, Tim and Adrienne Routledge are keen to build up their savings while also making the most of family life.
Tim, 43, works as a relationship manager in the charities division of an investment bank while Adrienne, 40, is a director of a public relations firm. Their combined take-home pay is roughly £100,000.
"We both work hard and enjoy having regular family day outings, which are expensive with five of us," says Adrienne. "We also hope to go to Cyprus for our family holiday next year, which will cost around £8,000, and have plans to spend £20,000 on home improvements over the next 12 months."
The couple have an array of savings plans in place for their three children: Steph- anie, eight, Charlotte, six, and Sam, two-and-a-half. They have £20,000 in Nationwide Smart accounts at 5.45 per cent, and £6,000 in premium bonds.
They pay £25 a month into a child trust fund with Nationwide building society for Sam, earning 6.55 per cent interest, and £25 a month into equity individual savings accounts (ISAs) with Nationwide for the other two children.
Tim and Adrienne also put £200 a year apiece into three tax-efficient friendly-society savings plans for each child, one with Family Assurance and two with Engage Mutual Assurance.
Other savings and investments include £7,000 in premium bonds for Tim and Adrienne themselves; £12,000 in cash ISAs split between the Halifax at 5.3 per cent and Portman building society at 5.25 per cent; and £5,000 in individual shares, including companies such as Barclays bank.
The couple have a 25-year £160,000 repayment mortgage on a two-year fixed rate with Nationwide at 4.39 per cent. They bought their four-bed house in Beckenham, Kent, for £465,000 in September 2005 and it is now worth £600,000.
They have had the mortgage for 18 months and overpay by around £500 a month, as their deal allows them to do without penalty.
The couple also own a one-bed flat in Beckenham, worth £180,000, which they rent out for £650 a month. They have a buy-to-let mortgage on this property for £130,000, and are on a five-year fix at 5.34 per cent with National Counties building society.
"The flat actually costs us about £100 a month," says Adrienne, "but we've taken this on as a very long-term investment."
Adrienne has a personal pension with Friends Provident and pays in £230 a month, while Tim contributes 6 per cent to his company scheme.
The couple pay £110 a month for £100,000 worth of life and critical illness cover with insurer Swiss Re.
The cure: Life cover is the one flaw in your plans
With a substantial income, equity in their property, savings and surplus cash, Tim and Adrienne are in a sound financial position, agree our panel of independent financial advisers (IFAs). "But they do need to address their protection needs, as this is a vital part of financial planning with a young family," says Keith Church- ouse of IFA Churchouse Financial Planning.
Tim and Adrienne have a decent spread of investments and make the most of tax-free ISAs.
To find cash for their planned trips and home improvements, they could reduce the sum held in premium bonds, says Alison Roberts of IFA Pi Financial Dixon Sutcliffe & Co. "The overall odds of winning any prize with a single bond are 24,000 to one."
Since Portman is to merge with Nationwide later this year, the couple should check if they are in line to receive a cash windfall of between £200 and £1,000 for holding an ISA with the society, says Mr Churchouse.
As for their shares, holding equities in individual companies rather than in unit trust funds means they aren't spreading their risk, warns James Norton of IFA Evolve Financial Planning. He recommends they sell these and put the proceeds in an investment fund such as a stocks and shares ISA.
Under current rules, it is possible to contribute up to £7,000 each tax year to a "maxi" equity ISA. Alternatively, they could invest £3,000 in a cash ISA and £4,000 in stocks and shares.
Tim and Adrienne should continue making overpayments when possible to erode their mortgage debt.
Well in advance of the end of their current two-year fix, they should check what other deals are available - and then switch if they find a better one, depending on what fees are involved in doing so.
Otherwise they risk slipping on to the lender's standard variable rate (SVR), which is likely to mean a hefty increase in their repayments given the climate of rising interest rates.
The buy-to-let property is a comparatively risky investment, says Mr Norton. "They already have substantial exposure to this asset class through their main home, and are relying on price rises to recoup their losses."
Adrienne and Tim should regularly review their pension plans' charges and performance, advises Ms Roberts, to ensure they are getting the most from their retirement funds. In particular, Tim should take full advantage of being able to make additional voluntary contributions (AVCs) through his employer's pension scheme, as these are especially beneficial for higher-rate taxpayers.
As a priority, the couple must review their life insurance, warn the advisers. With three children, the financial impact of one or both parents dying would be huge. Their current £100,000 worth would not be "anywhere near enough" to cover the mortgage or the childcare and living expenses, says Mr Churchouse.
The couple should add all these costs together and calculate the shortfall between the total and the protection they have in place at the moment.
Both should then see if any extra cover is offered by their companies, and make good the difference. "Many employers offer 'death in service' cover of four times salary," says Mr Norton.
A simple term assurance policy should cost as little as £21 a month for £100,000 of cover over 18 years on a joint life basis. This should be written in trust to avoid inheritance tax.
If you would like a makeover, write to Sam Dunn at The Independent on Sunday, Independent House, 191 Marsh Wall, London E14 9RS, or email firstname.lastname@example.org
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
Bargain Hunter: Exclusive discount on a SmartGlider - a self-balancing electric scooter
My Tinder date asked for a refund when I declined a second meet up
Number of parents moving to their desired school catchment area is increasing, according to Santander research
Bank-beating exchange rates on your international payments
Be warned of the dirty tricks the bailiffs pull
- 1 More than 11,000 Icelanders offer to house Syrian refugees to help European crisis
- 2 If these extraordinarily powerful images of a dead Syrian child washed up on a beach don't change Europe's attitude to refugees, what will?
- 3 Senior British politicians tell David Cameron: When dead children are being washed up on beaches – it's time to act
- 4 Make your voice heard: Sign The Independent's petition to welcome refugees
- 5 Refugee crisis: Aylan's life was full of fear - in death, he is part of 'humanity washed ashore'
Climate change: 2015 will be the hottest year on record 'by a mile', experts say
Senior British politicians tell David Cameron: When dead children are being washed up on beaches – it's time to act
Jeremy Corbyn calls Osama bin Laden's killing a 'tragedy' - but was it taken out of context?
If these extraordinarily powerful images of a dead Syrian child washed up on a beach don't change Europe's attitude to refugees, what will?
If you're not already angry about the refugee crisis, here's a history lesson to remind you why you really should be
Theresa May says migrants should be banned from entering the UK unless they have jobs lined up
iJobs Money & Business
£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...
£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...
£14000 - £16000 per annum: Recruitment Genius: This company was established in...
£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...
Day In a Page
With four bedrooms, this spacious maisonette in a mid-terrace period-style house in Holland Road is well-maintained and offers high ceilings and period features.
The terraces of this two-bedroom penthouse apartment offer panoramic views that stretch over fifty miles from the cliffs of Beachy Head.
In the heart of the coastal village of Mumbles and moments from the pier, this five-bedroom Victorian terrace is set over three floors and retains many original features.
In a sandbanks location, moments from the beach, this three-bedroom apartment has a large open-plan living area and a south-west facing balcony.
This four-bedroom home has an annexe accessed from the side of the house, with potential for improvement and conversion subject to the necessary permissions.
In the heart of the hamlet of Wardley, this five-bedroom period home offers countryside views and a stylish interior, with original features and open fireplaces.
Offering countryside views and landscaped gardens, this three-bedroom Grade II-listed lodge has a spacious conservatory and a large cellar that could serve as a workshop.
Set in approximately 1.5 acres, this four-bedroom home comes with a second, detached property that's currently used as an annexe.
In the hamlet of Newchurch, this former parish church is now a four-bedroom home complete with clock tower and eyrie.
Offering scenic views from a large balcony and sun terrace, this four-bedroom home has a wraparound garden and a heated swimming pool.
Offering views across the Humber and East Yorkshire Wolds from a glass panelled balcony, this four-bedroom barn-style home befits a life of leisure.
This four-bedroom home offers versatile accommodation with annexe potential; features include a hot tub, sauna and Norwegian BBQ hut.
Well-located for schools, colleges and the town centre, this contemporary thatched cottage offers flexible living space with six bedrooms.
Built in 1907, this four-bedroom Edwardian period home has been refurbished by the current owners, retaining many original period features.
Surrounded by landscaped gardens, this five-bedroom home offers living space across three floors.
This lovely country home in Burnham Market is currently run as a popular holiday cottage, with five en suite bedrooms and colourful gardens.
This three-bedroom 17th-century former village bakery is just a few miles from the East Sussex coast.
Set on a landscaped plot, this light and airy four-bedroom home comes with a log burner in the lounge, a fitted kitchen and an open-plan ground-floor layout.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Built on a former chapel site, this impressive four-bedroom home boasts balconies, stunning views and contemporary modern living.
This three-bedroom house is situated in a quiet mews and set over three floors. Features include glazed staircases and high ceilings.
A period townhouse set over four floors, this five-bedroom home was built in the 18th Century and retains many original features.
With five bedrooms, this spacious home offers beautiful gardens and modern interiors - set within the popular market town of Bingley.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
In the pretty market town of Bungay, this grade II-listed Mill House is arranged over four floors, offering four bedrooms and three reception areas.
This first-floor flat comes with two bedrooms, an impressive open-plan reception room and two lovely roof terraces.
This five-bedroom home comes with a range of outbuildings including a large barn which could be converted into a self-contained granny-flat or rental.
Moored at Taggs Island and reached via a pretty garden, this two-bedroom houseboat has a vaulted reception room and skylit garden studio - currently a beauty salon.
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.
A contemporary house spread over three storeys, this three-bedroom detached home has large sliding doors that open out to the River Quaggy.
Moored in Chelsea's Cheyne Walk, this houseboat offers two double bedrooms and a teak deck that's ideal for al-fresco dining.
This former village bakery, dating back to the 17th century, is now a three-bedroom detached home just a few miles from the East Sussex coast.
On the picturesque Isle of Man, this four-bedroom character home has a ground-floor shop that's currently run as a newsagents and a flat that would make an ideal holiday let.
In a new collection of flats, this first-floor two-bedroom apartment offers ample entertaining space and a prime view of Furze Green from a private balcony.
This three-bedroom stone-built cottage currently trades as the village store with a restaurant in the annexe and family accommodation on the upper floors.
Previously two semi-detached properties, this five-bedroom home is spread over three floors with a large breakfast kitchen, orangery, office and gym on the second floor.
This five-bedroom home enjoys countryside views over the Blyth estuary to Southwold, offering flexible living space with a ground-floor annexe - ideal for use as a holiday let.
Close to the market town of Eye, this four-bedroom detached home offers a double-height living room which takes the place of the original, 19th-century, chapel nave.
Dating back to the 19th century, this four-bedroom home needs modernising. Spanning three storeys, the red-brick house has a fireplace, a small terrace and a cellar.
Just outside of Cambridge, this single-storey home offers three double bedrooms, a living room with vaulted timber ceiling and ladder steps that lead to a mezzanine study area.
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.
A former coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, an attached office, kennels and an outbuilding that's currently used as a gym.
Located beside an impressive Victorian viaduct, this four-bedroom home has an open-plan living area that is glazed on two sides, with skylights and high ceilings.
A former furniture workshop, this three-bedroom home has high ceilings and painted brick walls, in a village setting only fifteen miles from the coast.
This five-bedroom stone townhouse features a pine staircase and an Inglenuk fireplace, double doors from the lounge give access to an enclosed courtyard.
This five-bedroom, detached home blends traditional and modern design; the sleek kitchen features a gas hob and oven set within an exposed chimney breast.
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.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B or countryside retreat, subject to change of use permissions.
This Grade II-listed three-bedroom home is situated on a private road, just a short walk from the sandy beaches of Frinton-on-Sea.