Stay up to date with notifications from The Independent

Notifications can be managed in browser preferences.

Wealth Check: Pilot seeks a safe landing for savings

Learning to fly a glider 10 years ago changed one reader's life, says Ben Chu. As pension age approaches, she wants to know what to do with investments

Ben Chu
Saturday 08 March 2003 01:00 GMT
Comments

Vanessa Gregory wanted gliding lessons for her 50th birthday. She took her pilot's licence then married the man who introduced her to flying. She has been with Richard Gregory, 80, for almost 10 years and they still go gliding together. "It can be really lovely and peaceful, knowing it's your skill and knowledge in using the air currents that keep you up there," the 59-year-old district councillor says.

Vanessa Gregory wanted gliding lessons for her 50th birthday. She took her pilot's licence then married the man who introduced her to flying. She has been with Richard Gregory, 80, for almost 10 years and they still go gliding together. "It can be really lovely and peaceful, knowing it's your skill and knowledge in using the air currents that keep you up there," the 59-year-old district councillor says.

Mrs Gregory has been an independent councillor in Diss, Norfolk, since 1999. "I was interested in land planning in our area," she says. "There were derelict factories and I wanted to know what was going to happen to them. That led me to stand for election."

Mrs Gregory had been running an employment agency in Diss, after working for a company supplying lighting equipment to the film industry. Her duties on the council take up two and a half days a week and she is paid £3,000 a year. If re-elected in the May polls she intends to serve another four years.

The Gregorys have a three-bedroom, 17th-century cottage in a conservation area. Their property is worth around £200,000. Mr Gregory, who was in the RAF, has a disability pension. Mrs Gregory supplements her salary by drawing on her savings. She cashes in £2,500 a year from her policies; £1,000 from Sun Life, £500 from Skandia, £500 from Prudential and £500 from Norwich Union.

She also has £40,000 invested in Peps, Isas and unit trusts. A Tessa has just matured and Mrs Gregory would like to know what she should do with £5,000. "I understand it has to be reinvested by June into another Tessa or Isa. Should I change any of my other investments?" Mrs Gregory paid into a guaranteed annuity Equitable Life pension. Last May the guaranteed value was £26,500 and the bonus 10 per cent. "Will this still be the case when it matures next August on my 60th birthday? What should I do when it matures?"

The Gregorys spend £5,000 a year on holidays. They own a share of a yacht in Greek waters and they regularly visit Mr Gregory's brother's house in the South of France. "One day we might emigrate to New Zealand," Mrs Gregory says. "My husband's son and family live there."

She has other concerns. "We have no health or life insurance," she says. "I thought our house would fund my future capital needs or health care. Is this reasonable? It is near a small town and, assuming I keep reasonably fit, it should be suitable for the rest of my life."

She is also worried about what sort of pension she can expect. "I have no need of further income at present," says Mrs Gregory. "My husband gets an excellent RAF pension but it dies with him. What would be the best way of making up the deficit when the time comes?"

We put her case to Rob Guy, of Timothy James and Partners, Peter Watson, of Watson Financial Management and Ken Rayner of the MarketPlace.

Profile: Vanessa Gregory, 59

Status: Married to Richard Gregory, 80;

Occupation: District councillor in Diss, Norfolk;

Property: 17th-century, three-bedroom terraced cottage (value £200,000);

Car: Rover 220 sDi (diesel);

Debts: None;

Income: £3,000 a year from district council; £2,500 from investments;

Investments: Sun Life policies (£1,000 a year); Skandia managed bond (£500 a year); Prudential Prudence bond (£500 a year); Norwich Union policies ( £500 a year); Peps, Isas and unit trusts;

Pension: Equitable Life guaranteed annuity. Matures August 2003;

Stocks and Shares: Government bonds; BT shares (702), mmO 2 (702), Scottish Power (185), Tesco (370) ;

Outgoings: (Per month) Council tax and water £125; utilities £25; telephone £30; house insurance £25; car insurance and fuel £40; yacht share £35; food/drink/ entertaining/dog £320; gliding £30; social events £100 (a year): two holidays £2,000.

'Reinvest Tessa in an Isa and check equity-release plans'

Solution 1: Tessa

Mr Guy says Mrs Gregory should re-invest the £5,000 from her maturing Tessa. He recommends the West Bromwich Building Society Tessa-Only Isa account that offers 4.25 per cent on instant access for balances of £1,000 or more. It can be accessed in a branch or by telephone.

Mr Watson says as Mrs Gregory's current account contains only £800 and she is planning house improvements the money should not be tied up. He recommends putting £3,000 into a Lloyds TSB cash mini- Isa which pays 4.25 per cent and has instant access. The remaining £2,000 should go into her current account.

Solution 2: Investments

Mr Watson says the Gregorys are too heavily in equities, given their age and low incomes. The older you are the less time you have to ride out a stock market fall, and the less your wealth the less you can afford risks. They should try to avoid additional charges in switching their portfolio and, with markets being so low, they could lose if the stock market took off over the next two years. Mr Watson recommends they sell £3,000 of their shares each tax year and when the shares have all been sold they should start selling their equity unit trusts and Isas at the same rate of £3,000 a year. They should switch this money into gilt and cash funds within a stakeholder pension.

Mr Rayner thinks Mrs Gregory has a broad portfolio of investments from different providers, and a mix of government bonds and equities, thereby spreading her risk. She is utilising her tax-free allowances with Tessas and Isas. Her investments have done well since 1994, despite recent falls so she would not benefit from cashing them in at what may be the bottom of the market. She can probably afford to leave it for a few years in case of recovery.

Mr Guy says Mrs Gregory's portfolio of Isas and equities is more geared to growth than income. Her priorities are likely to change and she needs to establish a structured approach to repositioning these investments to provide a long-term sustainable income.

Solution 3: Pension

Mr Watson says regardless of whether Mrs Gregory is re-elected she can invest £2,808 into a stakeholder pension each tax year. Even though she is a non-taxpayer, this will be grossed up to £3,600. He recommends she puts the money into gilts and fixed-income funds to help reduce the level of risk in her portfolio. Having endured the problems of a weak insurance company with the Equitable Life fiasco she should consider Legal & General because it is the last UK pension company with a Standard & Poor's AAA rating for financial strength.

Mr Guy says the one-off bonus she received from Equitable was compensation for giving up her right to a guaranteed annuity. When she is 60, she should choose an annuity from the open market rather than take the Equitable annuity rate. The three best rates for a female age 60 with a £10,000 pension fund are: Norwich Union (£589 a year), Canada Life (£587 a year) and Scottish Widows (£586 a year).

Solution 3: The future

Mr Guy says Mrs Gregory may need to consider an equity release mortgage for an income, a lump sum, or a combination of the two to supplement her retirement income. He suggests Northern Rock and Norwich Union but thinks it is worth waiting since this market will probably become much more competitive over the next few years as more lenders enter the market.

Mr Rayner says there are several ways of releasing equity. Age Concern and the Council of Mortgage Lenders have good leaflets showing the safe options available.

Mr Watson says the only way to guarantee the health care Mrs Gregory may need is to buy a long-term insurance policy. The leading providers are AXA, Bupa and Norwich Union. These policies do have geographical exclusions so she needs to decide if emigration to New Zealand is likely before she buys this type of plan. And if she moves there, she will lose the index-linking on her state pension.

If you would like to be given a financial health check-up, please write to: Wealth Check, 'The Independent', 191 Marsh Wall, London E14 9RS, or e-mail cash@independent.co.uk.

Join our commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

Comments

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in