Money: One woman's way

FINANCIAL MAKEOVER

Doctor Joanne Lister is 62. After divorce and single parenthood she began a career in middle age as an academic, specifically researching educational policy for women. She presently earns more than pounds 25,000 a year but is due to leave full-time work next March to join what she describes as "one of the statistically poorest groups in society" - that of retired single women.

Dr Lister has a small mortgage outstanding of pounds 5,000, which is more than covered by an endowment policy with Eagle Star that has nine years still to run and a projected maturity value of pounds 25,000. She owes pounds 4,000 in tax on consultancy work but clears her pounds 500-a-month credit card bill every time. A recent savings binge appears to be making some headway. As well as having funds put aside to cover the pounds 4,000 tax bill she has another pounds 19,000 on deposit with Schroders Bank, pounds 39,000 in PEPs and investment trusts (at least, that is, before last week's stock market crash) and pounds 3,000 in a Tessa.

Dr Lister is already drawing her state pension and a pension from the Universities Superannuation Scheme, which give a combined income of pounds 6,000 a year. She also has a number of small "frozen" pensions yet to be drawn from previous jobs: a Clerical Medical personal pension, additional voluntary contributions (AVCs) with the Prudential and a non-contributory pension with Commercial Union.

Dr Lister says her minimum future spending needs are pounds 10,000 a year (at today's prices), although that sum would exclude perks like travelling or indulging her hobby of watercolour painting. She sees herself as very healthy - "I could live an active life until I'm 90 at least" - and would like to put in place a manageable plan that maximises her savings.

What a financial adviser says:

Dr Lister's pounds 10,000 target income should be attainable, although she should continue to put as much aside from her income as she can while she is still earning.

Last week's stock market travails should not prompt her to sell her PEPs and investment trusts. This part of her savings will form the single biggest lump of her pension top-up and should be held for now with a view to switching to corporate bond PEPs at a later date to boost her income. Corporate bond PEPs will pay a tax-free income of 7 per cent or more - another pounds 2,500- plus a year - and while PEPs are due to be superseded by Individual Savings Accounts (ISAs) in 18 months' time, ISAs are also expected to offer opportunities for tax-free returns.

Dr Lister should continue to fund her tax-free Tessa; she can save pounds 1,800 a year on top of her original pounds 3,000, although, again, Tessas are expected to be superseded by ISAs in 1999.

While they may be small, she should ask her remaining pension providers for illustrations of her likely pensions. It would also be a good idea to consider keeping her funds in with-profits or other lower-risk investment options to protect against future stock market problems in the limited time before she draws these pensions.

Dr Lister may be able to avoid her pending tax bill by putting the self- employed earnings on which this tax is due into a pension plan.

Usual savings limits can be sidestepped by "carry-back" rules. A pension company with low charges and a good cash fund would be best; two to consider are Standard Life and Friends Provident.

For cashing in these pensions, what is known as drawdown or phased retirement might be considered for Dr Lister, letting her take some income in the short term while allowing her funds to remain invested for more growth.

Her cash should be split between an emergency fund in an "instant access" postal account and a notice account for living expenses and house maintenance costs that are more predictable. Legal & General Bank pays 7.6 per cent on pounds 10,000 in its 60-day notice account, 60 Direct.

Dr Lister says she plans to keep up the endowment policy until maturity (when she will be 70). This will give her the best possible returns from the policy, and on maturity the proceeds can be used to boost her retirement funds.

q Dr Joanne Lister was talking to Paul Grant, director of Master Adviser, an independent financial adviser (IFA) based in central London and a member of the Financial Options network of IFAs.

If you want to be considered for a financial makeover for publication, write to Steve Lodge, personal finance editor, Independent on Sunday, 1 Canada Square, Canary Wharf, London E14 5DL. Fax: 0171-293 2096 or 2098; e-mail: S.Lodge@independent.co.uk. Include details of your financial position and a daytime phone number, and say why you think you need a makeover.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
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.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

SThree: Talent Acquisition Consultant

£22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...

Recruitment Genius: Experienced Financial Advisers and Paraplanners

Negotiable: Recruitment Genius: This extremely successful and well-established...

Guru Careers: FX Trader / Risk Manager

Competitive with monthly bonus: Guru Careers: We are seeking an experienced FX...

Day In a Page

Seifeddine Rezgui: What motivated a shy student to kill 38 holidaymakers in Tunisia?

Making of a killer

What motivated a shy student to kill 38 holidaymakers in Tunisia?
UK Heatwave: Temperatures on the tube are going to exceed the legal limit for transporting cattle

Just when you thought your commute couldn't get any worse...

Heatwave will see temperatures on the Tube exceed legal limit for transporting cattle
Exclusive - The Real Stories of Migrant Britain: Swapping Bucharest for London

The Real Stories of Migrant Britain

Meet the man who swapped Romania for the UK in a bid to provide for his family, only to discover that the home he left behind wasn't quite what it seemed
Cheaper energy on the way, but it's not all sunshine and rainbows

Cheaper energy on the way, but it's not all sunshine and rainbows

Solar power will help bring down electricity prices over the next five years, according to a new report. But it’s cheap imports of ‘dirty power’ that will lower them the most
Katy Perry prevented from buying California convent for $14.5m after nuns sell to local businesswoman instead

No grace of God for Katy Perry as sisters act to stop her buying convent

Archdiocese sues nuns who turned down star’s $14.5m because they don’t approve of her
Ajmer: The ancient Indian metropolis chosen to be a 'smart city' where residents would just be happy to have power and running water

Residents just want water and power in a city chosen to be a ‘smart’ metropolis

The Indian Government has launched an ambitious plan to transform 100 of its crumbling cities
Michael Fassbender in 'Macbeth': The Scottish play on film, from Welles to Cheggers

Something wicked?

Films of Macbeth don’t always end well - just ask Orson Welles... and Keith Chegwin
10 best sun creams for body

10 best sun creams for body

Make sure you’re protected from head to toe in the heatwave
Wimbledon 2015: Nick Bollettieri - Milos Raonic has ability to get to the top but he must learn to handle pressure in big games

Nick Bollettieri's Wimbledon files

Milos Raonic has ability to get to the top but he must learn to handle pressure in big games
Women's World Cup 2015: How England's semi-final success could do wonders for both sexes

There is more than a shiny trophy to be won by England’s World Cup women

The success of the decidedly non-famous females wearing the Three Lions could do wonders for a ‘man’s game’ riddled with cynicism and greed
How to stop an asteroid hitting Earth: Would people co-operate to face down a global peril?

How to stop an asteroid hitting Earth

Would people cooperate to face a global peril?
Just one day to find €1.6bn: Greece edges nearer euro exit

One day to find €1.6bn

Greece is edging inexorably towards an exit from the euro
New 'Iron Man' augmented reality technology could help surgeons and firefighters, say scientists

'Iron Man' augmented reality technology could become reality

Holographic projections would provide extra information on objects in a person's visual field in real time
Sugary drinks 'are killing 184,000 adults around the world every year'

Sugary drinks are killing 184,000 adults around the world every year

The drinks that should be eliminated from people's diets
Pride of Place: Historians map out untold LGBT histories of locations throughout UK

Historians map out untold LGBT histories

Public are being asked to help improve the map