Wealth Check: 'Are we saving the right way to retire in style?'

Each week we give 'IoS' readers a financial makeover

John and Victoria Densley want to know if they have enough money to retire in comfort.

The problem

John and Victoria Densley want to know if they have enough money to retire in comfort.

John worked as a primary school teacher for 26 years and receives an index-linked £10,000 teacher's pension. But he continues to work in his local council's education department and pays 6 per cent of his salary into its final salary pension scheme.

He and his wife - a teacher for 13 years - also contribute to a Norwich Union stakeholder to support her future pension income.

They have a £66,536 part-repayment and part-interest-only mortgage, with three endowment policies due to mature in between six and 10 years. Their home is worth around £115,000 and from time to time they use the equity in the house to borrow money for other expenses.

Trying to build up their savings, they have £5,000 in a Nationwide e-account, and £2,500 in premium bonds.

John has around £10,000 invested in a mix of shares, individual savings accounts (ISAs) and personal equity plans (PEPs), including £6,000 in a Jupiter PEP spreading cash across European income and UK growth funds. He is also investing £100 a month into two Legal & General index trackers.

Life cover is provided by their endowments, and Victoria has income protection.

The patients

John and Victoria Densley, 54 and 53, from South Wales.

Jobs: computer technician and teacher respectively.

Income: £50,000.

Savings: £5,000 in an e-account, £2,500 in premium bonds.

Investments: £10,000 across shares, ISAs and PEPs.

Goal: to pay off the mortgage and secure a decent pension.

The cure: Lower the investment risk, cut the mortgage

The Densleys' priority should be to decide how to repay their mortgage, says Jennifer Storrow at independent financial adviser (IFA) Gee & Co.

John should adopt a lower- risk strategy for his investments, says Mike Pendergast at IFA the One Group UK.

Property

First, the couple should contact their endowment providers to see if the policies are on course to clear the mortgage at maturity, says Ms Storrow.

Second, as they have no other debts, they could switch to a full repayment deal that lets them overpay without penalty, says Mr Pendergast. "This will reduce the outstanding loan and lessen their reliance on endowments."

Investments

John should rethink his investment strategy, says Ms Storrow. "He appears to have a high-risk attitude, but this is not appropriate for such a small sum in investment terms."

Martin Bamford of IFA Informed Choice urges John to plan how much to invest in each of the four main asset classes: cash, fixed-interest securities, property and shares. "He seems to have acquired a rather disparate bunch of investments; it's hard to see any evidence of asset allocation."

At the age of 54, John should consider a lower-risk approach, "possibly incorporating guaranteed growth bonds to secure fixed returns", says Mr Pendergast.

Pension

The teachers' pensions, John's local authority pension and their joint stakeholder should provide a reasonable retirement income of about half their current joint income, estimates Mr Pendergast.

But Victoria isn't eligible to contribute to the stakeholder because of rules regarding her salary and occupational pension, warns Mr Bamford. She should stop these payments and consider other vehicles, such as additional voluntary contributions.

If you would like a financial makeover, write to Sam Dunn at The Independent on Sunday, Independent House, 191 Marsh Wall, London E14 9RS, or email s.dunn@independent.co.uk