Wealth Check: 'What can I do with my 'rainy day' savings?'

Former teacher Beryl Bennett is retired and lives in Burnley close to her daughters and four grandchildren.

Beryl receives a teacher's pension of about £5,000 a year and state pension benefits worth £101 a week. Her outgoings, which consist mainly of running a car and general household bills, amount to around £230 each month.

She has £2,000 invested in an ISA and £9,000 in a TOISA - the accounts which were offered to Tessa savers when this tax shelter was abolished in 2001. Both are held with Abbey.

Beryl has savings totalling £50,000, which she's keeping aside for a "rainy day", possibly to be used later in life should she need to pay for a care home.

We asked three independent financial advisers for their assistance in helping Beryl to make the best of her finances: Lisanne Mealing of MD Associates, Vivienne Starkey of Equal Partners and Ben Gibbs of Re-Financial Planning.

Case notes

Beryl Bennett, retired, Burnley

Pension: Beryl is retired and receives a teacher's pension of £432 a month, plus a state pension of £101 a week.

Monthly outgoings: These include phone, utility bills and running a car, and total £230.

Savings: £2,000 invested in a cash ISA and £9,000 in a Tessa-only ISA - both with Abbey - plus savings of approximately £50,000

Insurance: None

Debts: None

Will: Yes

BILLS

With an annual income of around £10,000 and outgoings of about £3,000 a year, Beryl is able to maintain a reasonable standard of living, says Mealing. She may even be able to save money by searching for a better deal on her gas and electricity. The website uswitch.com will provide her with some help on the best deal available to her, depending on her consumption levels.

Starkey agrees that Beryl should shop around to make sure that she is getting the best deal on her telephone and utility bills. Keeping a record of her spending over a month, including household bills, car running costs, entertainment, and so on, may be tedious, but would give her peace of mind in the long run.

INSURANCE AND PROTECTION

With no financial dependents, Beryl has no need for life insurance, and critical illness cover is unlikely to be a key concern, says Gibbs. She receives a pension income, so a policy to protect this isn't relevant.

Beryl should keep her will updated so that it continues to reflect her wishes, advises Gibbs. She should also consider establishing an enduring power of attorney, if she does not already have one.

This would enable her family to administer her affairs if she were to become incapacitated. On a practical note, she should make sure that all her important financial documents are kept in a safe place and that someone else knows where these are.

SAVINGS AND INVESTMENTS

Beryl needs to make sure that her savings and ISAs are working as hard as they can, stresses Gibbs. Cash ISAs can pay up to 5.3 per cent interest so she must get the best deal. Portman Building Society and Alliance & Leicester are among the top-rate payers at the moment.

In addition, she can use stocks and shares ISAs to produce tax-free income, by investing in gilts or gilt and fixed interest funds (which make investments that pay out income) or shares that pay out income.

If she is looking to maximise income, she can expect an income of up to 5.5 per cent from a UK fixed interest fund. She may also find National Savings Index-linked savings certificates useful. They are tax-free, pay a return of 1.05 per cent above inflation - 2.3 per cent for February 2006.

However, these certificates are more useful to higher-rate taxpayers, because while the return is not as high as can be achieved in a high-interest account, it is paid tax-free.

Mealing also suggests Beryl consider reinvesting her cash ISA. She should make sure that she uses her ISA allowances every year to reduce the tax she is paying on her savings.

For her longer term money, Beryl may wish to consider investing £7,000 in a stocks and shares ISA, reducing risk by investing in a fund of funds portfolio, such as Jupiter Merlin Income or Growth, or perhaps the Skandia Cautious fund of funds range.

Beryl's "rainy day" money should be split up. She should put cash aside that she would need for a more immediate emergency, say £10,000, which could be invested in an immediate access savings account, such as Northern Rock's deal which pays 5.01 per cent a year.

The balance could then be invested in something longer term, such as a bond with the 5 per cent income payments either being deferred or taken, depending on her requirements for income.

Axa Distribution Bond is a good example of a lower-risk investment, although if Beryl was not too concerned about risk and was willing to tuck this away for longer periods, say in excess of 10 years, the range of options is wider.

INHERITANCE TAX

Depending on the value of her home, savings and investments, there may an inheritance tax liability payable on her estate when she dies, says Gibbs. The first £275,000 - £285,000 from 6 April for the next tax year - makes up the nil-rate band. No inheritance tax is payable on this.

Over the nil-rate band, tax is payable at 40 per cent. At this stage, she should identify any potential liability, though her options in addressing or reducing this are likely to be fairly limited based on her financial position.

Sport
Laura Trott with her gold
Commonwealth GamesJust 48 hours earlier cyclist was under the care of a doctor
Life and Style
Upright, everything’s all right (to a point): remaining on one’s feet has its health benefits – though in moderation
HealthIf sitting is bad for your health, what happens when you stay on your feet for a whole month?
Arts and Entertainment
Peter Griffin holds forth in The Simpsons Family Guy crossover episode
arts + ents
News
Orville and Keith Harris. He covered up his condition by getting people to read out scripts to him
People
PROMOTED VIDEO
Sport
France striker Loic Remy
sportThe QPR striker flew to Boston earlier in the week to complete deal
Arts and Entertainment
Gal Gadot as Wonder Woman
arts + entsFilmmaker posted a picture of Israeli actress Gal Gadot on Twitter
Sport
Vincenzo Nibali rides into Paris on the final stage of the 2014 Tour de France
Tour de FranceVincenzo Nibali is first Italian winner since Marco Pantani in 1998
News
Bryan had a bracelet given to him by his late father stolen during the raid
people
Arts and Entertainment
Chris Pratt stars in Guardians of the Galaxy
arts + ents
Arts and Entertainment
Pedro Pascal gives a weird look at the camera in the blooper reel
arts + entsPrince Oberyn nearly sets himself on fire with a flaming torch
News
Danny Nickerson, 6, has received 15,000 cards and presents from well-wishers around the world
newsDanny loves to see his name on paper, so his mother put out a request for cards - it went viral
Arts and Entertainment
Zoe Saldana stars in this summer's big hope Guardians of the Galaxy
filmHollywood's summer blockbusters are no longer money-spinners
Sport
Red Bull Racing's Australian driver Daniel Ricciardo (C) celebrates with Scuderia Ferrari's Spanish driver Fernando Alonso (L) and Mercedes' British driver Lewis Hamilton
sport
Arts and Entertainment
comedy
Arts and Entertainment
Public vote: Art Everywhere poster in a bus shelter featuring John Hoyland
art
Arts and Entertainment
Judd Apatow’s make-it-up-as-you-go-along approach is ideal for comedies about stoners and slackers slouching towards adulthood
filmComedy was dominated by the romcom at its most insufferable
Sport
Tour de France competitor Bartosz Huzarski’s legs have highlighted the gruelling nature of the race, after he posted a picture on Facebook showing extremely prominent veins stretching from his feet and all the way up his legs
Commonwealth Games
Life and Style
Elle Kaye demonstrates the art of taxidermy
food + drinkFood revolution taken a step further in new ‘edible taxidermy’ class
News
A rub on the tummy sprang Casey back to life
video
Sport
Halsall broke her personal best in the 50m butterfly
Commonwealth GamesEnglish swimmer is reborn after disastrous time at London 2012
Arts and Entertainment
O'Shaughnessy pictured at the Unicorn Theatre in London
tvFiona O'Shaughnessy explains where she ends and her strange and wonderful character begins
Life and Style
Workers in Seattle are paid 100 times as much as workers in Bangladesh
fashionSeattle company lets customers create their own clothes, then click 'buy' and wait for delivery
Arts and Entertainment
Red Bastard: Where self-realisation is delivered through monstrous clowning and audience interaction
comedy
Arts and Entertainment
booksForget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks
Voices
The Express offices in the 1930s when writers (such as Orwell) were paid around £2 weekly
voicesWebsites offering your ebooks for nothing is only the latest disrespect the modern writer is subjected to, says DJ Taylor
Life and Style
A cut above: Katy Guest at The Ginger Pig
food + drinkThe Ginger Pig's hands-on approach to primary cuts
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

    Application Support Analyst / Junior SQL Server DBA

    £40000 - £45000 per annum: Ashdown Group: An established professional services...

    Senior Risk Manager - Banking - London - £650

    £600 - £650 per day: Orgtel: Conduct Risk Liaison Manager - Banking - London -...

    The benefits of being in Recruitment at SThree...

    £18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...

    Test Analyst - UAT - Credit Risk

    £280 - £300 per day + competitive: Orgtel: Test Analyst, Edinburgh, Credit Ris...

    Day In a Page

    A new Russian revolution: Cracks start to appear in Putin’s Kremlin power bloc

    A new Russian revolution

    Cracks start to appear in Putin’s Kremlin power bloc
    Eugene de Kock: Apartheid’s sadistic killer that his country cannot forgive

    Apartheid’s sadistic killer that his country cannot forgive

    The debate rages in South Africa over whether Eugene de Kock should ever be released from jail
    Standing my ground: If sitting is bad for your health, what happens when you stay on your feet for a whole month?

    Standing my ground

    If sitting is bad for your health, what happens when you stay on your feet for a whole month?
    Commonwealth Games 2014: Dai Greene prays for chance to rebuild after injury agony

    Greene prays for chance to rebuild after injury agony

    Welsh hurdler was World, European and Commonwealth champion, but then the injuries crept in
    Israel-Gaza conflict: Secret report helps Israelis to hide facts

    Patrick Cockburn: Secret report helps Israel to hide facts

    The slickness of Israel's spokesmen is rooted in directions set down by pollster Frank Luntz
    The man who dared to go on holiday

    The man who dared to go on holiday

    New York's mayor has taken a vacation - in a nation that has still to enforce paid leave, it caused quite a stir, reports Rupert Cornwell
    Best comedians: How the professionals go about their funny business, from Sarah Millican to Marcus Brigstocke

    Best comedians: How the professionals go about their funny business

    For all those wanting to know how stand-ups keep standing, here are some of the best moments
    The Guest List 2014: Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks

    The Guest List 2014

    Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks
    Jokes on Hollywood: 'With comedy film audiences shrinking, it’s time to move on'

    Jokes on Hollywood

    With comedy film audiences shrinking, it’s time to move on
    It's the best of British art... but not all is on display

    It's the best of British art... but not all is on display

    Voted for by the British public, the artworks on Art Everywhere posters may be the only place where they can be seen
    Critic claims 'I was the inspiration for Blanche DuBois'

    Critic claims 'I was the inspiration for Blanche DuBois'

    Blanche Marvin reveals how Tennessee Williams used her name and an off-the-cuff remark to create an iconic character
    Sometimes it's hard to be a literary novelist

    Sometimes it's hard to be a literary novelist

    Websites offering your ebooks for nothing is only the latest disrespect the modern writer is subjected to, says DJ Taylor
    Edinburgh Fringe 2014: The comedy highlights, from Bridget Christie to Jack Dee

    Edinburgh Fringe 2014

    The comedy highlights, from Bridget Christie to Jack Dee
    Dame Jenny Abramsky: 'We have to rethink. If not, museums and parks will close'

    Dame Jenny Abramsky: 'We have to rethink. If not, museums and parks will close'

    The woman stepping down as chair of the Heritage Lottery Fund is worried