|
Lawrence Young
Age 40
Lives in Leeds
Occupation Teacher
Earns ?10,000-plus
Mortgage None
Debts Student loan
Investments ?15,000 in bank, ?500 Premium Bonds,
1,000 Abbey National shares
Pension None now, but has belonged to schemes in
the past
Aims To plan a comfortable retirement and buy a
bigger house
Life begins at 40, they say. For Lawrence Young, it has brought a realisation that he should get his finances better organised.
Not that he has any major money worries. 'I consider myself to be in a very fortunate position because my father left me enough money when he died a few years ago so that I could buy a house outright and not have a mortgage to worry about,' he says.
But he admits this has been a mixed blessing.'Not having a mortgage to pay has tended to make me a bit lazy,' he says. 'It has meant I can choose whether I work or not, and therefore I have tended to do so in "fits and starts", typically three or four days a week.'
At present, however, he is working full time, teaching English at a special school. As a result he expects to earn more this year (pro rata around £28,000 ). When he was younger he went from job to job, mostly in the pub lic sector, working for a variety of local authorities, the Department of Social Security and the penal reform group, Nacro.
But when he was 30 he decided to take a degree in English and theatre studies. This was followed by teacher training.
Since then he has been supply teaching. 'I am now thinking of taking a permanent job working with children with behavioural and learning difficulties.'
He is not a member of a pension scheme. He decided against joining the teachers' plan when he started supply teaching, thinking he could do better with the money himself. He has some bits and pieces of pensions from his previous employment in the public sector, but is not sure how to track them down.
However, he has not neglected his savings and has built up £15,000 in an Abbey National Supersaver account. He had originally earmarked this money for round-the-world travel, but now thinks this trip is unlikely to happen, so he does not need the money to be so accessible after all. As a result, he is in the process of moving £3,000 into an Isa with Smile, the online bank. He also feels he would like to dabble in shares.
His finances are helped by the fact that he has a lodger, another teacher, who pays rent of £30 a week. Lawrence has no debts apart from a student loan, which he is repaying at £25 a month, though he is not sure how long it will take to clear. He thinks he would like to move to a larger property in two or three years' time. If he is in a full-time job, he will probably take out a mortgage to fund the extra cost.
His only extravagance is travelling around the country supporting his old home football team, Aldershot.
Adviser 1: Amanda Davidson
At the age of 40, retirement planning becomes
critical. If Lawrence thinks he has some old
pensions with previous employers, he needs to
write to them and ask for information.
Lawrence should join an occupational pension
scheme. He is wrong to think that he could do
better with the money himself. An employer
contribution in most cases will at least match the
employee's payment and sometimes exceed it.
Any investments outside this would need to do
spectacularly well just to equal the returns. He
should also seek financial advice on whether it is
better to transfer his previous benefits to his new
scheme.
Lawrence should catch up on past pension
provision by transferring a lump sum into a
pension. He can go back over previous years, but
he needs to hurry, as rules change in April 2001
and will be markedly less generous. His ?15,000
savings need to be better invested. In order to buy
a house, he needs to keep some of it in cash.
For the longer term, say five years plus, he could
invest his money in unit trusts, rather than
individual shares, which are more risky. He can,
for instance, put ?3,000 into unit trusts via a
mini-equity Isa.
If Lawrence does get a full-time job, he may also
be able to take out a regular savings Isa to help
towards his future security. Once he takes out a
mortgage, he should look carefully at critical
illness cover to ensure mortgage protection in
case he falls sick.
Amanda Davidson works for financial adviser
Holden Meehan.
Adviser 2: Steven Price
Lawrence should move sooner rather than later
in order to repay any mortgage before retirement.
Based on an earnings multiple of 3.25 and ?30,000
in earnings, he could borrow up to ?97,500.
With some ?46,000 from the sale of his present
home (which he estimates to be worth ?250,00) he
could buy a property for up to ?144,000. For a
20-year loan, I would recommend a
repayment-only mortgage.
Lawrence needs to act on his pension quickly, for
a standard of living after retirement comparable
to the one he enjoys now.
He should join the Teacher's Pension Scheme.
This is likely to be better than anything he finds
himself. It is a good, final salary occupational
scheme. Based on 20 years of service from now
and a final salary of ?30,000 in today's terms, he
would get a pension of ?7,500 a year and a cash
sum of ?22,500. Additional voluntary contributions
(AVCs) or other savings could top up these
benefits.
As for his savings, I suggest Lawrence moves
?1,000 of his Abbey National shares and ?2,000
from his bank account to a mini equity Isa using,
for example, Save & Prosper's Premier Equity
Growth fund.
He could continue adding to this holding in future
via a regular savings Isa. He is moving ?3,000 to a
cash mini Isa. This leaves ?10,000 of liquid
savings. He should keep some ?5,000 for moving
costs, and ?5,000 as an emergency reserve fund.
Steven Price works for financial adviser Towry
Law. Advice is for guidance only.
• Do you want to appear in Wealthcheck? Write,
including daytime and evening telephone
numbers, a brief list of circumstances and any
investments, to: Wealthcheck, The Observer, 119
Farringdon Road, London EC1R 3ER, or
e-mail: cash@observer.co.uk. You must be
prepared to be interviewed and photographed.
|
Latest press releases 
