Wealth Check: 'What should we do with £30,000 from house sale?'

This summer, Carl and Joan Seddon went on a six-week driving holiday to Sicily. Mrs Seddon, 60, retired from her job as a secretary last year and the couple decided to treat themselves to a long break. "We like our holidays and had a special one this year," Mr Seddon says. "We usually only go away for about three weeks at a time."

Mr Seddon, 63, retired in 1999 after a long career as a regional sales manager. The couple have no complaints about life in retirement and are enjoying the opportunities it gives them. "It's wonderful," he says. "I can recommend it."

For many years, the Seddons have lived in a three-bedroom detached house in Stotfold, Bedfordshire. But they intend to move soon. "We'd like to go nearer the coast, perhaps somewhere with prettier countryside," Mr Seddon says. They have been looking in East Anglia, and the Devon and Somerset boundaries. "Somewhere with decent amenities and interesting activities would be good."

They believe that after costs, moving house should make them between £20,000 and £30,000 profit and they would like advice on how to invest this. Their savings include £50,000 in a Norwich Union Bicentenary Bond and various amounts in investment funds with Scottish Provident, Credit Suisse, Invesco, Scottish Mutual and Prudential.

"Most of them are worth more than we originally invested," Mr Seddon says. "But some have peaked and dropped. But I suppose in the end it comes down to the value of the funds when you need the money." They also hold £15,000 in shares.

Although not overly concerned about the state of their investments, the Seddons are aware they will need to draw on some of it within a few years. At present, they tend to use their pensions for day-to-day expenses and dip into savings for holidays and other such costs. "Should we sell our individual shares, which I think are going to do better next year, or look at doing something about our investment funds?" Mr Seddon asks.

The Seddons like to spend time with their two sons and their partners. Boyd, 32, lives in nearby Hitchin and Guy, 29 is in Kent. "They often come and visit us but we do go to them as well," Mr Seddon says. "Our younger son bought a house this year and we've been helping him decorate. We'll be doing the same for Boyd who is planning to buy soon."

They get around in a five-year-old Volvo V40 which is running well. "I'm very satisfied with it," Mr Seddon says. "I'll probably keep it for four years before thinking about making a change."

We put their case to Meera Patel, senior analyst at Hargreaves Lansdown in Bristol, Andrew Swallow, partner at Swallow Professional Financial Planning in Ipswich, and Anna Bowes, savings and investments manager of Chase de Vere Investments in Bath.

CARL, 63, AND JOAN SEDDON, 60 RETIRED

Family: Two sons, Boyd, 22, and Guy, 29;

Car: Volvo V40 SE;

Debts: None;

Savings: Abbey Direct Save account; Nationwide Bonus Saver account; Scottish Provident; Credit Suisse Asset Managed funds; Invesco High Income fund; Scottish Mutual with-profits; Prudential Flexible Investment bonds; Norwich Union Bicentenary Bond;

Pension: Company and state pensions;

Shares: £17,000;

Property: Three-bedroom house in Stotfold, Bedfordshire;

Outgoings: Council tax £118; water £24; gas £24; house insurance £16; electric £24; phone £30; Sky £18.50; food £250; dining out, theatre visits etc £150.

Solution 1: Expenditure

Ms Patel says the Seddons' expenditure is relatively modest. They have been wise to get rid of their outstanding debts and, with their mortgage also paid off, their joint income should be more than sufficient to maintain their quality of life.

Mr Swallow says the Seddons need to prepare a detailed cash-flow forecast over the next few years, taking into account their likely future income and expenditure. They must factor in the pension income increase when Mr Seddon reaches 65, allow for a new car and assess their holidays costs. Then they can plan the best investment structure for their circumstances.

Ms Bowes says £10,000 to £15,000 is probably a sensible amount for the Seddons to hold in cash but they could certainly improve on the interest rate they are getting on their saving accounts.

Their Abbey Direct Save account pays just 2.60 per cent gross but Birmingham Midshires Telephone Tracker II pays 4.35 per cent gross interest (although it allows a maximum of only three withdrawals in the first year).

It is always important to keep an eye on the rate of interest on savings accounts, because often the best rates do not remain competitive for the long term. Mrs Seddon appears to be a non-taxpayer they should put the cash into her name, so she can claim gross interest.

Solution 2: Savings

Ms Patel notes that a large chunk of the Seddons' savings is tied up in with-profits bonds. Most life companies which manage with-profits funds have suffered loss of financial strength, and their reserves have diminished. And the annual bonuses paid on these investments have fallen over the past few years. The companies in which the Seddons have invested are financially sound but they should not add any further to them.

Ms Bowes says the Seddons' portfolio should have an equal proportion of equities and fixed interest. They need to reduce their equity exposure and increase their gilt and fixed-interest exposure. They have the desired exposure to commercial property through their with-profits funds.

Mr Swallow says interest rates may be on their way up again during the next couple of years but to add balance to their investments the Seddons could consider the Halifax two-year bond at 4.41 per cent.

He suspects that with their Norwich Union Bicentenary Bond, they would be hit with a 25 per cent market value adjustment (MVA) if they encash it early. He says they should opt to take the maximum withdrawals (while still avoiding MVA) to reduce their exposure.

Solution 3: Stocks and Shares

Ms Patel says investing in individual equities is high in risk and worthwhile only if you have a very large portfolio. The Seddons should aim for a more balanced one. She suggests selling their shares and re-investing the proceeds into an investment fund.

They can each invest £3,000 tax-efficiently into a stocks-and-shares mini-Isa in each tax year so they should use up this allowance first, and any growth on the investment will be free of capital gains tax. Funds they should consider are the New Star Managed Distribution and the Jupiter Distribution funds, each of which are balanced portfolios of equities and bonds and provide an income of 5 per cent. For capital growth, they should consider funds such as the Cazenove UK Growth and Income and the Lazard UK Alpha.

Solution 4: Moving House

Ms Patel says when the Seddons have sold their house they should consider diversifying into other tax-efficient and lower-risk investments. For this they should consider National Savings. They can invest up to £30,000 each in premium bonds and any winnings they receive are tax-free and the capital is guaranteed.

Ms Bowes says they should direct the proceeds into distribution funds. These will naturally maintain the asset allocation that is right for them because they invest into equities and fixed interest. They could split the investment into a couple of funds such as New Star Managed Distribution and Insight Monthly Income.

Solution 5: Insurance

Ms Bowes says the Seddons do not need life assurance but they should consider long-term care insurance with some of their spare income.

Mr Seddon has less need of this because he has a good level of income from his pension, which could pay much of potential nursing home fees, but they should look at cover for Mrs Seddon.

Ms Bowes says they need to take action on inheritance-tax planning and ensure they have an up-to-date will.