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Laurent de Alberti
Age 25
Lives in North London
Occupation Travel agent
Earns c. ?14,000
Mortgage None
Debts No more than ?100 on credit card
Investments ?350 in instant access account
Pension None
Aims To make better use of his money and find out
whether a pension or an Isa would be better, bearing in
mind his eventual return to France
Laurent, who comes from Nice, arrived in London three years ago as an exchange student. He spent a year at Thames Valley University completing a degree in languages and economics and decided to stay on.
'When the time came for me to return to France, the French economy was rather depressed, so I thought it would be easier for me to find a job here in London.'
He has been working as a travel agent and is very happy with his current employer, Trailfinders, where he has been for a year. He hopes to stay with the company for the foreseeable future and work his way up.
At present he is not eligible for the company pension scheme and is wondering about the best way to save for the future.
He feels he needs to do something to stop himself spending nearly all his salary, which fluctuates depending on overtime.
He says: 'I am completely disorganised financially. Because my salary is different every month, I don't manage my money properly and seem to spend it on small things - clothes, cinema - that add up and leave me with hardly anything at the end of the month.'
He has no debts as he has paid off all his student loans, no overdraft and a minimal credit card balance, never more than about £100. He has £350 in a Barclays instant access savings account, but tends to use that money for holidays rather than long-term saving.
He takes plenty of holidays. One of the perks of his job is cheap travel and flexible hours which allow him to take time off every couple of months. Recently he travelled to San Francisco, New York and Budapest, and in the summer he is planning a month-long round-the-world trip.
He shares a friend's flat, paying £400 a month for rent and bills. He thought of buying a property, but feels it is not worth it as he is not planning to stay here permanently - and doesn't think his earnings would enable him to buy much anyway.
However, he would like to start building up some capital, and thinks he could afford to save £50 or possibly £100 a month. But he is not sure whether a pension or an Isa would be best, nor how difficult it would be to transfer his money should he go back to France, which he estimates won't be for another five years at least.
'I would like to know if there are any rules about transferring pension and investment funds to another European country and how convenient it is.'
Adviser 1: Gillian Cardy
Under stakeholder pension rules, Laurent's
employer may soon have to offer him a pension.
But it may not be the best thing for him - his
money will be tied up until he is 50. If his
employer is prepared to make a contribution, it
probably would be better to let this money be
invested on his behalf but review what he does
with his own contributions.
Although the Inland Revenue permits transfers to
qualifying pension schemes overseas, he may do
better to make regular savings into an Isa,
earmarking it as his retirement fund. He will then
be free to either leave it invested in the UK or use
it to invest in a suitable pension plan in France.
He should not underestimate the possibility of
needing a cash reserve for house purchase or
other major items of capital expenditure.
He should have no concerns about transferring
funds overseas. But there are other ways in which
Laurent can make better use of his money. For
example, he could change his current account to
a high-interest cheque account with a bank such
as Cahoot. He could also try being disciplined
about how much cash he withdraws each week.
He should make sure his credit card has a low
rate of interest. His provider charges 19.1 per
cent. He would also gain from moving his savings
from Barclays' high interest account, which does
not pay a competitive rate of interest.
An internet savings account such as Nationwide
e-savings or an Egg savings account would be
better, or he could use a mini cash Isa, which
means he gets his interest tax free. Smile is
paying one of the best rates.
Gillian Cardy works for financial adviser
Professional Partnerships
Adviser 2: Andrew Jones
If Laurent's company employs more than five
staff, he will soon find he is offered a pension
arrangement and, if he joins, he should be able to
take the benefits to France with him.
However, the question is whether pension
planning is the most appropriate form of saving
for Laurent. Pensions are very tax-efficient and
would be cost-effective under stakeholder rules,
but they are inflexible. The benefits cannot be
taken until age 50, and only 25 per cent of the
fund can be withdrawn as cash, with the
remainder used to purchase an annuity.
It may be better to make regular savings into an
Isa. While less tax-efficient, they offer greater
flexibility. Cash can be withdrawn at any time,
and they can be used for other purposes, such as
general savings or to build up a deposit for a flat.
Laurent's best option would be to set up a direct
debit arrangement to take the agreed amount
from his bank account each month. If he intends
to save for three years or more, he could consider
an equities Isa, but for a shorter period a cash Isa
would be more appropriate.
If he returns to France, he can either leave his Isa
invested, although he could not make further
contributions, or cash it in and take the money
with him.
Given his intention to return to France, Laurent
may be considered non-domiciled in the UK. As
such he can hold investments offshore, in the
Channel Islands for example, which are not liable
for UK tax unless the income or capital gains are
brought back into the UK. He could consider
investing offshore, although for smaller amounts
an Isa may be more practical.
Andrew Jones works for chartered accountant
Blick Rothenberg
Advice is for guidance only
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