Financial worry clouds island life

Marion Walton and Luke Shobbrook
Ages: 31 and 32
Live: in Jersey
Occupations: Researcher and youth worker
Earn: ?30,000 jointly
Mortgage: None
Debts: None
Investments: ?250 savings account
Pension: Personal pension, old employers' schemes
Aims: To invest ethically for retirement and build savings for daughter

After 10 years in the UK, Marion returned to Jersey. She was born and raised on the island and wanted to start a family there.

'It is so peaceful and safe here and the beach lifestyle is ideal for families,' she explains. She also wanted to be near her relatives. So she returned with her partner, Luke, whom she met in the UK. They now have a daughter, Maya, who is 10 months old.

While Jersey has many advantages, one of its drawbacks is the high cost of housing. Marion and Luke felt they were priced out of the housing market when they lived in London, but Jersey is not much better. They are very happy with the small house they are renting, which has a garden for Maya to play in, but it is expensive at ?740 a month. Buying their own home will be even more difficult. Marion says they will probably eventually buy a place in France.

They are both working on short-term contracts and studying at the same time. Luke is employed in the public sector four days a week as a health promotion officer and youth worker. He is hoping to get a permanent job soon. He has a diploma in youth work and is studying for a degree in psychology with the Open University to improve his career prospects. He would like to take a post-graduate qualification after that.

Marion works two days a week as a self-employed researcher for the NSPCC. She is also doing an MSc. through the Open University in research methods.

Before settling in Jersey, they had contributed 'minimal amounts' to pension schemes with former employers. Now they are starting to get concerned about their lack of proper pension provision.

If Luke gets a permanent job, he hopes to be able to join an occupational pension scheme. Marion is still contributing ?50 a month to a personal pension she started with Scottish Equitable but is worried about the impact of charges.

She would like something which is lower cost and wonders whether a stakeholder pension would fit the bill. But she has had 'mixed messages' about whether this option is open to people living in Jersey.

The couple also want to save more. As they are not eligible for Individual Savings Accounts because of their offshore status, they are unsure about their options. They would prefer any savings or pension contributions to be invested ethically.

In addition, they want to find an ethical investment for Maya, for whom they have a lump sum of ?1,550. They want to start making regular savings on her behalf as well, to help her towards college or a house when she turns 18.

Adviser 1: Michael Norem

Jersey is a separate jurisdiction to the UK, so different rules apply to pensions and other investments. Marion must stop contributing to her UK personal pension immediately as she is no longer eligible. Contributions made since she became non-resident in the UK may need to be refunded. Stakeholder pensions are not an option. Of the limited number of approved personal pension contracts in Jersey, only one has an ethical fund link, that being Norwich Union. Jersey personal pensions tend to be heavily charged.

Marion should check that she and Luke have suitable protection policies in place, such as income protection, life and critical illness insurance. Most forms of life assurance qualify for tax relief in Jersey. Given this, a good life assurance savings plan is a viable alternative to a personal pension and has the advantage of allowing full access to the proceeds at maturity. An example would be Standard Life's Versatile Investment Plan, which also has an ethical fund link.

Marion is right that Isas are not available to Jersey residents, but this is no hardship since the tax regime tends to benign. Thus when investing for the long term, an offshore fund or unit trust can be considered. In the socially responsible investment area we would look first at NPI, Jupiter and Friends Provident. Regular savings schemes can be set up into one of these unit trusts or one of the child-friendly schemes from Invesco or Aberdeen, which have lower minimums.

Michael Norem works for Moore Stephens Financial Management in Jersey.

Adviser 2: Rodney Ings

Securing permanent employment is of paramount importance as there is no unemployment benefit scheme in Jersey. Once this has been achieved, I would recommend Marion and Luke consider life assurance. They should take out a low- cost term assurance or family income plan.

Then they need to build up an emergency fund. Currently their savings stand at ?250. Ideally their emergency fund should be equal to six months' running expenses for the family.

Marion should not be contributing to a UK pension scheme; she can arrange a Jersey personal pension plan. Income tax relief is available for contributions.

Jersey residents also still benefit from tax relief on premiums on qualifying life assurance policies. Should Marion and Luke find they are paying income tax, a regular-premium life assurance policy would be a desirable route. Such plans could be used for long-term savings and university fees planning. If income tax were not being paid (as Jersey has high income tax thresholds), an offshore unit trust or Oeic savings arrangement would be a lower-cost option. The money they wish to invest for Maya could also be placed in one of these.

The purchase of a property in France or the UK is a real option for Jersey residents. Mortgage interest relief at 20 per cent is available on homeloans, regardless of where the property is.

Rodney Ings works for Jersey- based adviser Hemery Financial Services.

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