Moving into travel - hopefully

Stacey Nicholson
Age: 36
Lives: in London
Occupation: Royalties executive for video company
Earns: ?30,000
Mortgage: None
Debts: None
Investments: ?3,000 cash Isa
Pensions: Suspended personal pensions, company pension
Aims: To fund her way through business diploma

Stacey Nicholson was about to realise a childhood dream when the hijacked flights in America threw her plans into doubt: 'Since I was at school I wanted to go into the travel industry and I don't know why I never did anything about it.'

She had planned to leave her job in a video company next January to start a travel and tourism diploma at the Greenwich School of Business Management. Her ideal job would be arranging corporate travel, but she realises that the US terrorist attack could have changed the demand for this work.

'This is probably the worst time to go into the travel industry but I'll still do the course, because I have been planning it so long. My biggest fear had been that my age would go against me, but I have worked for years in large organisations and do understand how business travel works.'

And she has a fallback position: 'If I can't get the job I want, I can always come back to my old type of work.'

She already has the money organised to fund her studies: 'I am saving like mad at the moment and should have about £5,000 spare to see me through the eight- month course - living expenses, food, bills and going out. I have budgeted about £700 to £800 a month.'

Her cash Isa will pay the course fees, and as she has worked in her current job for less than two years, she can reclaim her company pension contributions. 'I will have paid in about £4,000 to my pension by the time I leave, but I don't want to touch this. It is my cushion in case I can't get a job.'

Because her finances are under control she does not have to earn as much as she earns now: 'I can afford to start at an entry level and work my way up.'

She enjoys travelling, but that is not her main reason for moving into the industry: 'I prefer travelling for holidays so I don't have to do any work while I am abroad. I want a regular job that is based here. I don't want any disruptions to my home life.'

In December she and her fiancé, Jon Linstead, are getting married. The wedding and honeymoon are already paid for, from their savings and a contribution from the family. They own a one-bedroom flat in Surrey Quays and recently paid off the mortgage. Her financial situation is, she says, 'relatively healthy', but she wants to know how being a mature student will affect her pension, and her position on tax and statebenefits.

Adviser 1: Amanda Davidson

Stacey will pay 20 per cent tax on her pension refund and needs to weigh up whether to use this money for studying or if she can afford to invest it in her pension. Technically she will not have been in an occupational pension for the past two years, so she could put the money into a personal pension, with 22 per cent tax relief, which will cancel out the tax charge.

Once she becomes a student, Stacey is unlikely to have earnings to justify pension contributions, but she can pay up to ?3,600 a year into a stakeholder pension without proof of income or indeed any income at all. Tax relief will cut the cost to ?2,808. The ?42,000 in frozen pensions may pay about ?5,000 a year at age 60 - a sum which is highly unlikely to provide the retirement funds Stacey would want.

When she starts working again, Stacey can reactivate her personal pensions, but she should certainly investigate any company pension schemes as these usually provide better returns for employees.

Once she is married, all building society and deposit accounts should be kept in Stacey's name rather than her husband's, because she will be able to get the income from these accounts paid gross while she is a non-taxpayer.

If she stops work in January, Stacey may well be entitled to a tax refund as she will not have had the benefit of her full personal allowance. She should arrange this with the Inland Revenue; her employer may be able to help.

Amanda Davidson is a director at Holden Meehan.

Adviser 2: Philip Stevens

When she stops work, Stacey should get an income tax refund and should contact her inspector of taxes to claim. She will not have to make National Insurance contributions as a student, but since 1990 most students have been unable to claim income support, job seekers' allowance or housing benefit. Student loans are restricted to courses lasting a full academic year, so Stacey is unlikely to qualify.

If Stacey is unemployed at the end of the course, she could claim jobseekers' allowance for up to six months based on her National Insurance contribution record.

Stacey's savings are likely to be adequate but she may wish to retain her pension refund in an accessible form in case there is a shortfall. I recommend she restrict any contributions to a stakeholder pension as the money is tied up until she is 50 and so could not be used if she had difficulty finding a job. As an alternative, ?3,000 could be invested in a cash Isa, with another ?1,000 used for pension contributions. Stacey can contribute up to ?234 a month knowing the Inland Revenue will increase it to ?300.

When she is working again, Stacey will have to decide whether to recommence contributions to her existing personal pensions or start a new stakeholder pension. She should consider contracting back into Serps, because the terms for contracting out today are significantly less attractive than when she originally contracted out.

Philip Stevens works for Sedgwick IFC

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