Job: Technical analyst at Credit Suisse First Boston in London
Salary: around pounds 24,000
Andrew spends his spare time rowing - a pastime nurtured during his time at Oxford University, from which he graduated last year. Financially, too, he has no problem keeping his head above water, despite pounds 1,800 of student loans and an overdraft to pay off.
"I am at the stage where I am starting to put money aside, but I cannot afford to tie it up for too long," he says. He wants to buy a flat or house in a couple of years, and will use the money he has saved by then for a deposit. For now, he is sharing a flat with two others.
As far as investments are concerned, Andrew is willing to take some fairly big risks for the sake of above-average returns. "I would be gutted, but I could afford to lose all the savings I have," he says. "It's not as if I have any dependants." He wants to put money aside for retirement but cannot pay into his employer's pension scheme until he is 25.
Christine Ross says: "Andrew does not strike me as cautious. But he may have to put the more adventurous side of his investment attitude on hold until he knows how much of his savings he will need to buy a flat or house. He likes keeping his money in a current account, but I think he should consider moving some to a deposit account with a higher rate of interest. The Cheltenham & Gloucester pays 6.5 per cent gross on its Instant Transfer account, which is operated by phone.
He may like to keep a small balance in his Lloyds Bank current account, rather than incurring overdraft charges. These are probably higher than the interest on the Halifax account where he keeps his savings. Another tip is this: when any of us tries to ascertain monthly outgoings, we tend to add up the direct debits and tack on spending money. It never seems to add up, and I usually advise adding 20 per cent for `leakage'.
Andrew should definitely join his employer's pension scheme when he can. But what about now? Retirement savings do not have to be made through pension plans. I recommend that he starts saving via a personal equity plan. The money you make from a PEP is tax-free although, unlike pensions, they do not offer tax relief. Most plans start from pounds 50 per month. You should consider holding a PEP for five years or more.
GT Global would be a good PEP savings plan for Andrew. He could combine his monthly savings between its UK income fund, and for a little bit more excitement he could invest in its Orient fund. PEP rules allow 25 per cent of the amount invested to be in non-qualifying funds, and the Orient fund comes under this category because it invests in the Far East, excluding Japan. If Andrew had invested pounds 100 in the GT Income fund five years ago, this would now be worth pounds 243 after charges, and pounds 100 invested in the GT Orient fund five years ago would have produced a return of pounds 302 after charges.
Andrew works in information technology, and people in that profession often become self-employed. They may take on contract work for different organisations. If Andrew does this he will have to think about taking out a personal pension plan.
His employer provides long-term sickness income protection. Should Andrew be ill and unable to work, his employer will pay him for the first 28 weeks. After this, the policy will pay him 75 per cent of his salary (including any state benefits). This income replacement will continue until he is well enough to return to work, or his normal retirement date (whichever happens first). I believe this is one of the most important types of insurance. Many people have enough life insurance but cannot manage if they are ill long term. When Andrew takes on a mortgage, he may not need life assurance if he still has no dependants. But he should consider taking out a critical illness policy, which would pay out a lump sum if he became seriously ill. This could be used to repay his mortgage.
Overall, Andrew is heading in the right direction. But he should review his finances regularly, preferably with an independent financial adviser"n
Interview by Rachel Fixsen
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