Wealth Check: 'What can I do with my 'rainy day' savings?'
Saturday 01 April 2006
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.
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
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.
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.
Mark Dampier: 'So what if a recovery fund is out of luck? The clue is in the title'
Women born in 1950s facing severe financial hardship over pensions could have fates changed by Ros Altmann - should she choose to help
Questions of Cash: We bought the special ceramic poppies. Then the saga began
Five Questions On: GB Energy's new tariff
Halifax credit card charges: bank is forcing interest rate rises on its customers
- 1 Engineer pictured fixing plane's engine with 'duct tape' by concerned EasyJet passenger
- 2 Two-year-old says goodbye to bin man best friend
- 3 Saudi Arabia mosque bombing: Two volunteer security guards hailed as heroes for stopping Isis suicide bomber reaching worshippers
- 4 There is something wrong but very right about this Bible illustration
- 5 Remove smartphones from the hands of under-18s and maybe they will grow up to be less dumb
EU referendum: David Cameron's rules are a 'democratic disgrace', says French-born Scottish politician set to be denied a vote
Migrants in Kos: Photos show real tragedy after Brits abroad complain of 'awkward' holidays
British tourists complain that impoverished boat migrants are making holidays 'awkward' in Kos
A nation of inequality: How the UK is failing to feed its most vulnerable people
Australian man punched in the face for defending Muslim women from abuse on train
David Starkey 'tells Amal Clooney to shut up and stop over-promoting human rights'
iJobs Money & Business
£30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...
£20000 - £25000 per annum + OTE £45K YR1: SThree: At SThree, we like to be dif...
£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is a mul...
£55 - 65k (DOE): Guru Careers: A unique opportunity for a permanent C# Develop...
Day In a Page
This four-bedroom Edwardian home offers a combination of original features and contemporary design after a renovation by the current owners.
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 four-bedroom home offers a vaulted ceiling in a breakfast room that's ideal for summer entertaining with doors that open to the patio and garden.
On the market for the first time in more than 50 years, this six-bedroom home is a project with vast potential - spread over three floors of living space.
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.
Surrounded by rolling countryside, this four-bedroom barn conversion comes with a self-contained, one-bedroom annexe that could serve as an office or a holiday let.
Located near Harrogate town centre, this five-bedroom Victorian terrace is arranged over three storeys while a current study serves as an optional sixth bedroom.
A ground-floor flat in a country house, located a mile from Sway; this two-bedroom home would make an ideal weekend retreat on the edge of the New Forest.
On a popular residential lane in Caterham on the Hill, this four-bedroom family home offers a secluded garden and a convenient location for local schools and public transport.
Just a short walk from Westerham green, this three-bedroom cottage has a light kitchen with exposed brickwork and double doors that lead to a south-facing garden.
In a prime spot opposite the River Thames, this one-bedroom flat has an 18sq ft reception room with glass doors that open out to a private terrace.
Set in the hills above Llanwrda Village, west Wales, this 18th-century three-bedroom farmhouse has holiday-let potential from a separate barn conversion and annexe.
This charming end-of-terrace townhouse is arranged over three floors, with two double bedrooms and a private courtyard garden located at the rear of the property.
Located in the University area, this semi-detached five-bedroom home is arranged over three floors - there's even a rear garden and off-road parking too.
Only a few minutes' drive from the charming town of Marlow, this two-bedroom home sits on the private riverside estate of Harleyford.
This detached four-bedroom home in Middleyard is arranged over two floors, with features that include a wood-burning stove and bespoke oak staircase.
In a row of eight detached Georgian residences, this five-bedroom home offers views of The Sound, Mount Edgcumbe and Cornwall from its impressive veranda and full-length balcony.
If you love cooking for friends this two-bedroom flat - complete with views of the iconic Battersea Power Station and an open-plan kitchen/dining area - will go down a treat.
Located above Grasmere village, this five-bedroom home is arranged over three floors and offers countryside views across Grasmere Lake towards Silver Howe.
Surrounded by the Western fells, this five-bedroom Georgian home retains many original features including panel-plastered ceilings, sash windows and fireplaces.
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, subject to change of use permissions.
A former period coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, office, kennels and an outbuilding that's currently used as a gym.
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 four-bedroom detached home comes with a double carport, useful workshop, garden and two walkways that offer views of the adjacent countryside.
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
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.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
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.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.
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