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Janet Hackel
Age: 43
Lives in: Inverness
Occupation: Higher education administrator
Earns: ?35,000
Mortgage: ?71,000
Debts: None
Investments: Peps, Isas, Tessa and building society
accounts
Pension: Member of occupational scheme
Aim: To find out how much life assurance and other
protection she needs when she adopts children, also
to assess efficiency of current savings and pension
provision
Janet Hackel has only had herself to worry about until now. But this is about to change: she is expecting shortly to be approved to adopt one or two children aged between four and 12.
She knows this means she will need to rethink her finances. She says: 'As a single person, who never needed to know about such things, I haven't a clue about life insurance, saving for university fees, childcare costs, etc, etc. Now I need to find out.'
As an American with dual citizenship, she also needs to learn about what is available here. She does not even have life insurance to cover her mortgage, though death benefits of around three times her salary are provided through her pension scheme.
She has lived in the UK since 1988. For the first two years she worked in London, where she was employed by an American University's overseas programme. Then she moved to Scotland to work at Edinburgh University, and six months ago she started her current job for the UHI Millennium Institute, which will eventually become the University of the Highlands and Islands.
Unfortunately, her current employer does not provide adoption leave, so when the children arrive she may have to take extended unpaid leave. Thereafter she hopes to work part time or from home while they are settling in. This is likely to affect her income over that period.
Janet has a four-bedroom house, so she will not need to move to a larger property. She also has savings. Having originally taken out a Pep and then an Isa mortgage, she retained those savings after converting her mortgage to a repayment loan. Her Peps and Isas are worth around £18,000.
She has a Tessa with the Dunfermline building society, with two years to run, plus a Homeowners Friendly Society plan, which is about to mature with proceeds worth around £2,500. In addition, she has invested some of the profits - around £6,000 - from the sale of her flat in Edinburgh in other Dunfermline accounts and also makes regular savings with the society.
But she does not think this will last. 'I realise I'm going to have to change the way I save. I don't think I'll have much extra money floating around, and I want to make sure that what I have is working for me efficiently.'
As well as sorting out adequate protection and starting some savings for the children's further education, Janet is also concerned about her pension provision. 'Who wouldn't be worried about their pension after all the problems that have been highlighted in the press recently,' shesays.
She has been a member of the universities superannuation scheme only since 1993, although she is still contributing to the American state pension scheme and to an American Higher Education pension.
Adviser 1: Gordon Wilson
Janet has organised her financial affairs well.
She should continue to save into Isas - I would opt
for cash mini-Isas in the short term as she may
need to call on savings to help support the
children.
Janet is right now to turn her attention to
protection. She should begin by taking out
mortgage protection to cover the debt in the
event of death or critical illness. Through her job
she has death-in-service cover of three times
salary, which is ?105,000. She should check
whether any dependants' pensions would be
payable to adopted children. If not, term
assurance or family income benefit would see
them through education, and is relatively cheap.
Janet should then check what her employer
would pay if she were unable to work long-term
through ill ness. It may be that an income
protection policy is also required.
The method of saving for the children's further
education would be determined by how old they
are. For short periods, I would look to the likes of
the Dunfermline as this is safe and accessible. For
five or more years I would consider a
broad-based, international unit trust, investment
trust or Oeic.
The universities superannuation scheme provides
excellent benefits, and Janet should not assume
that recent press coverage can be applied to her
position. I would recommend a full investigation
into the interaction between her US- based
pension benefits and her UK pensions.
Gordon Wilson works for financial adviser
Thomson & Shepherd.
Adviser 2: Peter Earle
Janet is taking on a big responsibility. She will
soon have two children who are financially
dependent on her, so she should put in place a
decreasing term assurance and critical illness
policy to cover full repayment of her ?71,000
mortgage in the event of death or the diagnosis of
a serious illness during the remaining mortgage
term.
She should then boost her life assurance using
term assurance or whole-of-life assurance. The
amount and term should take into account her
existing death-in-service benefits and the ages of
the children.
It is also important to have enough income
protection insurance, in case Janet suffers a
long-term illness that prevents her working, to
cover her personal expenses and needs of her
dependants. She should first find out about the
sick pay benefits her employer provides, so she
can dovetail her own cover into that.
Janet should review the efficiency of her existing
savings and investments. Has she recently looked
at the performance of her Isas and Peps? If she is
not already making maximum use of her Isa
allowances she could certainly think of setting up
a mini cash Isa. For her longer-term savings, a
mini stocks and shares Isa would offer greater
growth potential.
In order to boost her pension she could consider
making additional voluntary contributions, or
buying added years. She will need to seek
specialist advice about her US pension
entitlements.
Peter Earle works for financial adviser Holden
Meehan.
· 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
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