Wealth Check: Writer needs a word on finances
Saturday 13 March 2010
Matt Lynn, 47, is a self-employed thriller writer from Goudhurst, Kent. He lives with his wife, Angharad, a 39-year-old lawyer, and their three children, Isabella, 9, Leonora, 7, and Claudia, 2.
He says: "I need to support three children through school and university, and I'd like to be able to help them on to the property ladder as well. I'd also like to make sure I have a comfortable retirement. I can't really imagine I'll ever stop working, but I'd like to be able to stop depending on it financially."
Matt's business, a limited company, is the main source of income as his wife only recently came off maternity leave. His new book, Fire Force, was published in February.
Annual income: £100,000 to £150,000 depending on the year
Annual expenditure: £109,000
Savings: £155,000 in an ISA account, £200,000 in the company account
Property: £1.25m house with an interest-only mortgage at 1.5 per cent
Investments: £500,000 buy-to-let flat with an interest-only mortgage of £275,000
Pension: Currently worth £30,000, with £1,500 annual contributions
Advising him are Christopher Wicks from Bridgewater Financial Services, Robin Keyte from Towers of Taunton and Aj Somal from Uniec Financial Solutions...
Matt hopes to continue writing into his old age, but he needs a retirement plan whereby work would be optional, not a necessity.
Wicks suggests setting a provisional retirement age for planning purposes – perhaps 66, when he would be eligible for a state pension.
He says: "It is about establishing your long-term goals and ensuring that there are the funds to deliver them. Even if you or your wife were to die or become incapacitated."
Matt hopes to build up a retirement income of £50,000 per year, so Wicks suggests creating a "cash flow model" to see whether his current arrangements would provide this.
Keyte predicts a fund of around £861,900 would be needed to provide an index-linked pension of £46,100, which could then be topped up with money from interest, rent from tenants and savings.
Matt is sceptical of pensions, but despite the negative press they remain one of the most tax-efficient ways to save for retirement.
According to Keyte, Matt's current pension would leave a shortfall of £713,800 on his desired retirement fund, so contributions should be increased considerably.
"The annual contributions that Matt needs to make from now onwards through to age 65 to meet this shortfall are £20,950 per annum," he says. "If Matt has more good years than bad years, this is an affordable option."
But before he does so, Matt should check he's getting the best deal on his current plan, and look into changing if not.
For an easy option, Keyte says a stakeholder pension plan can charge as low as 0.4 per cent. Matt should also consider a Self Invested Personal Pension (SIPP) plan, which allows holders greater freedom in choosing investments.
"I like the service offered by the Alliance Trust Select SIPP," says Keyte. "This allows investments in individual shares and fixed interest stock as well as funds."
Matt already pays just under £20,000 per year in school fees for two of his daughters, and as they grow older costs will increase.
Taking into account an extra £9,000 per year for university costs and a £20,000 mortgage deposit for each daughter, Keyte predicts Matt will have to find extra revenue if he is to continue supporting them. He says: "The total funds required to meet all of these costs related to Matt's children over the years up until Claudia is 25 in 2033 are a massive £720,000. It may be that a second income will be available from Angharad which will make a significant improvement to the situation."
Somal recommends saving into a Child Trust Savings (CTF) account, where a maximum of £1,200 can be saved per year.
He says: "Money cannot be taken out of the CTF once it has been put in, but once the child is 18 they will be able to decide how to use the money."
Matt's daughters depend on his income for their school fees, so he should consider insuring it against sickness or injury.
"It could pay a proportion of his income, say 60 per cent, until he recovers and is able to work again," says Somal. "This plan could be taken out on an individual basis or through his limited company."
Matt is paying interest-only on his mortgage, meaning he's making no dent in the debt.
"I recommend that Matt looks into moving this mortgage to a repayment basis as soon as reasonably possible," says Keyte. "It may mean this leads to a significant increase in outgoings: if so it would be worth doing some planning on ways to increase earnings, such as second earnings from Angharad's work as a solicitor."
For a free financial check-up, write to Wealth Check, The Independent, 2 Derry Street, London W8 5HF; or email wealthcheck @independent.co.uk
- 1 The BBC has just done more to eradicate ‘terrorism’ than all our wars since 9/11
- 3 Mystery man who gave mum heart-warming note on train 'wanted to put a smile on her face'
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
French court convicts three over homophobic tweets, in case hailed as a 'significant victory' by LGBT rights campaigners
Greece elections: Syriza and EU on collision course after election win for left-wing party
British Muslim school children suffering a backlash of abuse following Paris attacks
British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
Liberal Democrat minister defends comments suggesting immigration causes pub closures
iJobs Money & Business
£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...
£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...
Competitive salary & benefits!: MBDA UK Ltd: MBDA UK LTD Indirect Procurement...
£16500 - £16640 per annum: Recruitment Genius: This fast growing Finance compa...
Day In a Page
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 deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
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
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village