Back home to a hard life

Vital Statistics

Wendy Harper

AGE 49

LIVES IN London

OCCUPATION Physiotherapist

EARNS £22,000

MORTGAGE None

DEBTS None

INVESTMENTS £17,000 in unit trusts

PENSIONS US and UK state pensions

AIMS To find a permanent job and get a pension

For the past 20 years Wendy Harper has been living and working in Seattle; before that she spent two years in Saudi Arabia. Earlier this year, she decided to return home to her family, but she's found it difficult to switch cultures: 'I miss my friends, having a pension and having a job.'

She had not intended spending so long in the US but the friends she made in Saudi Arabia were American and, when they left, she bought a one-way ticket to Seattle and just stayed: 'Within six weeks of arriving in the States, I had a job, an apartment and a car.'

She gave that up to come back and now she has no home, no car, and a temporary job at a London NHS hospital.

Until she finds permanent work, her outlook is precarious. She is living in nurses' accommodation, which costs her £309.50 a month, including hot water and heating. But her contract ends in October and then 'I am out of the door', she says.

She is urgently looking for work and has five job applications in. But she is finding that her US experience is not always relevant to the UK health system, and she has a typical nurse's bad back.

One spin-off from spending so much time working or looking for jobs is that she doesn't spend very much money: 'I do not have time for much social life, but I have managed to save £5,000 in five months.'

She has £6,000 in a tracker fund with Birmingham Midshires, £6,000 in a stocks and shares maxi-Isa with Axa Sun Life and £5,000 in a Perpetual UK Growth Fund. She is putting aside £800 a month in a bank account. She knows she needs to get her life and finances on a firmer footing, and asks: 'Given my age, what is my best bet for a secure future? I feel I am living on a knife edge.'

She wants advice on how to boost her pension in the years she has left to work. She had been in the NHS scheme before going abroad but cashed it in to buy a car in the US - 'the sort of mad thing you do when you are young'. She cannot rejoin the scheme while she is a temporary worker, but she did maintain her National Insurance contributions while she was away. This has safeguarded her basic state pension and she is also in the American State Pension Fund, which will produce about $500 a month when she is 62.

She would like to buy a home once she has a permanent job, but will not buy a car because she dislikes driving in this country.

Adviser 1: Lynne Maltby

Wendy's uncertain job status means she can look only at short-term solutions.

She is saving quite a substantial sum and this is ample to split into different investments. She should move the surplus from her bank current account: it should be earning interest. She can find competitive rates in instant access postal accounts.

She should buy another Isa next April, perhaps a mini-cash Isa. Access to her savings is important, so she should pick one that allows instant, no-penalty withdrawals. On current rates, the Coventry and Leeds and Holbeck building societies both meet this criteria and pay 7.05 per cent. Her main priority, once she has a staff job, is to plan for retirement. Stakeholder pensions start next April, when Wendy will be able to save £3,600 a year for retirement, whether or not she has found a permanent job by then. I suggest she obtains a projection of her state pension benefits by completing form BR19, available from her nearest Benefits Agency or by phoning 0191 2187585.

If her temporary position continues for a long time, Wendy should periodically review the amount she has on deposit. If this becomes more than she will need as a deposit on a flat, she should think about moving some of the money into equity-based investments.

Lynne Maltby is a manager with Willis National.

Adviser 2: Joanne Cox

Wendy should not take on any long-term contracts until her situation is more certain, as she could find herself with inappropriate or unaffordable plans.

She should keep her savings flexible in case she is unemployed or needs the money quickly to buy a home. Mortgages usually last 25 years, but this would take Wendy into retirement, which is not advisable. She should opt for a capital and repayment loan to be certain that the loan is paid off while she is still working.

If Wendy takes a full-time job with the NHS, she should rejoin its pension scheme, which has many additional benefits, and is index-linked. She could boost her pension by buying added years or by making Additional Voluntary Contributions.

If her next job has no occupational pension, she should buy a personal scheme or a stakeholder plan. A stakeholder pension has low charges with penalty-free flexibility. Wherever she works, she should contribute the most she is allowed, though she will probably put in as much as she can afford.

She should review her pension position towards the end of the tax year and, if she has not used her savings to buy a house, could put a lump sum into a pension this year. Charges on single-premium plans are lower than for regular contribution schemes.

Joanne Cox is a financial adviser with the Co-op. Advice is for guidance only.