Wealth Check: 'Where should I invest to save for my retirement?'

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Mark Banks works as a driver for a haulage company and is based in the Midlands. He has built a portfolio of unit trusts and has seen his total investments grow, despite the volatile markets.

Mark Banks works as a driver for a haulage company and is based in the Midlands. He has built a portfolio of unit trusts and has seen his total investments grow, despite the volatile markets.

He wants to know whether investing directly in the markets is a better way to build a retirement fund than contributing to a pension. He also wants to know whether he is wise to keep all his money with one bank where he has his savings, his current account and his mortgage, and wants advice on the best long-term savings account.

Are his investments the best ones for future growth and should he keep his endowment mortgage, or switch to repayments?

We put his case to Ben Yearsley at Hargreaves Lansdown, Anna Bowes at Chase de Vere and Philippa Gee at Torquil Clark.


Salary: £30,000

Debt: Mortgage

Property: Owns one-bed flat, valued at £90,000, 15 years to run on mortgage, Standard Life endowment

Savings: £6,000 in Halifax current account, £250 a month to Halifax savings account, 6 per cent interest

Investments: £8,375 invested into unit trusts,

total portfolio worth approximately £11,000

Pension: £25 per week into company pension

Outgoings: £1,270 a month, including mortgage


Mr Banks is thinking about stopping his pension contributions, in favour of stock market investments. Mr Yearsley advises against this, pointing out that a pension is one of the most tax-efficient ways to save over the long term. He could actually increase his pension contributions, to a maximum of 20 per cent of his salary, or even consider a SIPP (self-invested personal pension), which would give him more control over his investment choice.

Ms Bowes points out that because Mr Banks' employer pays into the pension, he should investigate whether they would match any higher contributions.

Ms Gee says that because a pension attracts tax relief as the money goes in rather than when it is taken out, it maximises the chance of money growing. The downside is that funds are tied up until retirement.


Ms Gee feels that for Mr Banks' current levels of saving, holding all his accounts with Halifax carries few risks. If his cash reserve should go over £10,000, however, he should think about opening a high interest account elsewhere.

Mr Banks should also make sure he uses up his mini cash Isa allowance because this allows him to earn interest free of tax. Mr Yearsley suggests an Isa with Abbey, currently paying 4.6 per cent for the first £3,000 of savings. Paying the rest into ING Direct (4.41 per cent) would actually be better than the Halifax account, because the latter only pays its headline interest rate on the first £250 saved.


Ms Bowes says that Mr Banks has picked good performers for his unit trusts, and that there would be no need to sell any of the funds unless his investment objectives change. But she does suggest that Mr Banks draws up a global asset allocation plan. Right now he has no American funds in his portfolio, so that could be an area for him to consider next.

Ms Gee cautions that the Jupiter Financial Opportunities Fund, although a good performer, is a specialist fund more suited to an investor with a larger portfolio. She suggests that he keeps the fund, but picks a broader-based unit trust for any further investment.

Mr Yearsley says that Mr Banks has picked funds at the "spicier" end of the investment spectrum and suggests adding core funds, such as Lazard UK Alpha in the UK and HSBC European Growth, to the portfolio to even this out.


Mr Yearsley points out that endowment mortgages are not great value for money, unless the home owner needs the life assurance that is part of the plan. Take away the life cover, and it can be better to invest elsewhere. But he adds that switching to a repayment mortgage is not an easy decision. If Mr Banks' endowment is predicted to fall short of the mortgage, moving to repayments makes sense.

Ms Gee favours switching to repayment, as it provides certainty, albeit at the cost of higher monthly outgoings. But he could keep the endowment policy going as a standalone investment.

Ms Bowes says that she is still happy to recommend Standard Life as an endowment provider, and that keeping the policy going could prompt a windfall, should the company's demutualisation plans go ahead.

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