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Vital statistics
Philip Martin
AGE 51
LIVES IN Wellesbourne
OCCUPATION Customer centre manager
EARNS £27,000
MORTGAGE £9,000 left to pay
DEBTS None
INVESTMENTS Tessa, endowments and share optio ns
PENSIONS Company pension and AVCs
AIMS Early retirement
The Martin family claim they have no lavish tastes or extravagant foreign holidays. The most Philip Martin admits to is the odd meal out and an occasional raid on Marks & Spencer's food hall. But he is conscious of his age and circumstances.
He works for the Waste Control Division of the RMC Group and has a company car and share options to which he contributes £140 a month. His wife, Linda, 44, also contributes to a share option scheme, about £15 a month through her job as a part-time cashier with Cheltenham & Gloucester, now part of LloydsTSB.
When one of Philip's share option schemes matured earlier this year, he sold some shares to buy new furniture and a holiday and has 550 left. He asks what his next move should be: 'Do I hold them, convert them, play with the stock market, or spend the money?'
Ideally, he would like to stop work a couple of years early, but he is realistic: 'If staying to 65 is the way it has to be, it has to be.' He and Linda want to be as comfort able as possible in retirement: 'We have fairly small sums involved and it is a question of where best to channel them.' On present contributions, he can expect £12,000 a year in today's money from his pension and additional voluntary contributions.
Linda has a small company pension from Cheltenham & Gloucester. Last year she earned around £6,000, with overtime and bonuses. 'Her salary is often our petty cash float,' says Philip.
Philip pays the utility bills. 'What is left of my salary each month is transferred to a building society account, leaving enough in the bank to buy the groceries and not go overdrawn,' he says.
In 1976, Philip and Linda took out an endowment mortgage but soon switched to a repayment loan: 'I realised I was earning enough money to separate the two, but we kept the endowments running.' When the three policies mature next May, the £30,000 proceeds will be available to invest. 'I have got to the stage of life where I need to start thinking ahead,' says Philip. 'I need to do something positive with this sum otherwise it will slip through our fingers.'
Their only other savings are £40 a month which they each pay into a Norwich & Peterborough Tessa.
Their daughter, Lauren, has just finished studying drama at college and, apart from spending August at the Edinburgh Fringe, she plans taking a year out from acting 'to get herself sorted out', says Philip. She has a job lined up, working for Direc tory Enquiries. But her father says: 'Any money she earns goes mostly on clothes, socialising and travelling expenses. Oh to be 18 again.'
Adviser 1: Graham Bates
It is difficult to predict whether Mr Martin will be able to retire early, but they are both wise to invest in their employers' save-as-you-earn share option schemes. They should allow them all to run to maturity but, since much of their savings are tied to their employers, they should consider other forms of investments.
After exercising the options, they could sell the shares and reinvest in a stocks and shares Isa, which offers the potential for capital growth.
Collective investment funds such as unit trusts or open-ended investment companies (oeics) spread both risk and opportunity. One to consider is Fidelity International.
I suggest stock market investments are best for the mature endowments, although this means accepting a medium level of risk, which can be reduced by placing a lump sum in a with-profits bond.
The Martins should stock up on Isas. I suggest UK, European and International funds such as Save & Prosper Premier Equity Growth for the UK, and HSBC European. They could also consider splitting £6,000 between the Henderson Global Technology unit trust and the CGU Global Success unit trust. These are riskier but there is the potential for above-average long-term growth.
• Graham Bates is chairman of Bates Investment Services
Adviser 2: Nicola Page
The best way to achieve any goal is to give it a set timescale. Mr Martin should contact his employer's pension department now and ask how much he would get from his pension and AVC, in today's terms, if he retired at, say, 62. If he has scope to increase his AVCs, he can also ask what his pension would be if he paid, say, an extra £40 or £80 a month (the amount currently going into Tessas).
Once the Martins know these figures, they should work out how much income they will need in retirement, including the cost of replacing the company car. Investing the £30,000 from the endowments will certainly help. They should invest for capital growth between now and retirement with a combination of Isas and zero-dividend preference shares, which will provide tax-free investment returns of about 8 per cent at present. The money should grow to more than £55,000 by the time Mr Martin reaches 60.
I recommend Mr Martin sells his 550 RMC shares. There will be no capital gains tax to pay as the annual exemption is £7,200 and they will have £4,000 to invest immediately in a tax-free Isa. They should hold on to the remaining share option schemes.
• Nicola Page works for Chartwell Investments.
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.
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