Into shares and out of the country

John McCarthy
Age 34
Lives in London
Occupation Transport controller
Earns ?19,000
Mortgage None
Debts None
Investments ?23,000 in shares, ?12,000 in Isa/Tessa
Scottish Widows with-profits plans (2) Scottish Life
with-profits plan, ?10,000 in various building societies
Pensions ?220 a month to NPI personal pension
Aims To work abroad

John McCarthy met Atsuko at evening classes. She is Japanese and they were both learning German. They are now married and have a son and daughter, Sean and Kennedy, aged two and four, but John has the urge to travel.

During the day he works from the Royal Free Hospi tal, for a charity that arranges transport for patients. He is also studying for a BA in English. When he graduates next year, he will take a TEFL course and wants to teach English abroad for a year or two.

'By that time I will be 35 and the older you get, the less chance you have of getting a job, particularly in a place like Japan where they only want younger teachers.' He has not yet decided where he will go. 'Perhaps Switzerland, Thailand or Japan. I only like big cities.'

Wherever it is, Atsuko will stay in London with the children. She is resident in the UK but has never worked in this country and has no National Insurance number.

John's hobby is dealing in shares. 'I am interested in gadgets, so in the technology boom I bought into a few companies that I knew about. When interest rates and inflation are low, I would not bother putting money in the bank. If you put it in the stock market, you may halve it or you may double it, but at least you have excitement along the way.'

He was successful until the downturn in the dotcom market, which turned £30,000 of shares into £25,000. He tries to cash in when he makes profits but knows that he does not always sell unprofitable shares soon enough. He does not have a sharedealing budget. He says: 'If my wife was working, I would have more disposable income and would deal more.'

At the moment he pays £220 a month in rent and is happy to sell the shares to buy a house.

'I would miss the stock market because I really enjoy it. But bricks and mortar is one of the most profitable and reliable things you can invest in, and you have the security of a house.'

He has around 30 building society accounts, some dormant and some paying economic rates. 'I am not totally in favour of carpet-bagging but you don't want to be the mug who is left behind.'

He wants to know if he can have a stakeholder pension while he is working abroad and whether he should open one for Atsuko.

He thought he had plenty of life insurance but it turns out to be only the small element that comes with savings policies and free accidental death insurance from the bank.

Adviser 1: Danielle Leich

Someone who is UK domiciled can become non-resident for income tax if they work overseas for at least one full tax year. Then his income is not taxable in the UK, regardless of where it is paid. He can invest up to ?3,600 a year in a stakeholder pension while abroad, provided he does not lose his UK residency. Non-earning spouses can also contribute, so John could use some of his surplus cash to buy a pension for his wife. The person making the contribution needs to satisfy the residency test.

His with-profits savings plans are combined savings and life insurance policies and the amount of life cover payable is the minimum sum assured. If John requires life cover without savings, he should opt for term insurance as the premiums are cheaper.

Whether to get separate policies for him and his wife depends on the amount of insurance needed. If his wife died, he would have to fund childcare costs, so John should consider a family income policy, which is a type of decreasing term insurance providing income over a fixed period.

Atsuko has no income, so, if some of the building society accounts were in her name, she could claim interest gross. John should also consider giving her some of his investments to use her annual capital gains tax exemption if he makes enough profit to pay the tax. But he must remember that a spouse can use the money given however he or she wants.

Danielle Leich works for PriceWaterhouseCoopers.

Adviser 2: James Dalby

Some of John's money on deposit is unlikely to be earning the best rate of interest. Sainsbury's Bank Instant Access account pays 5.1 per cent gross. The Legal & General Easy Access Tracker account pays 6.25 per cent. Atsuko should make sure she is receiving interest on her savings gross, by completing Inland Revenue form R85, available from bank branches. John should check which Scottish Life fund he is contributing to and possibly consider switching to an alternative.

I would not advocate chasing windfalls, but pulling out is a tough decision: do you stay in the account with miserly interest in the hope of a windfall or move the money elsewhere for a better rate?

John is clearly not aware that he is woefully under insured. Insurance takes on many guises and it is easy to become complacent when you have a number of different policies.

It is extremely important that he assess his life insurance situation as a priority. He has a number of accidental death policies, but they are limited to paying out only on death from an accident.

One of the best steps he can take towards buying a house is to have a decent deposit. He could consider liquidating some of his shares or pulling some of his building society deposits together. If he were to sell shares, he should consider whether to transfer any to his wife first to use both their capital gains tax allowances.

James Dalby works for Bates Investment Services.

Advice is for guidance only

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