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Joan Carney
Age 66
Lives in Sunderland
Occupation Retired
Pension ?12,600
Mortgage ?5,000
Debts None
Investments Bank deposit account
Aims To find suitable investments for her capital so
she can enjoy the rest of her retirement
After her husband Robert died, retired teacher Joan Carney fought a six-year legal battle to prove his GP's negligence for failing to spot that Robert had been suffering from heart disease.
The case was finally settled out of court last autumn, providing Joan with a £50,000 settlement. Feeling vindicated, she now wants to enjoy the rest of her life.
She has already used most of her settlement to pay off all but £5,000 of her mortgage, and to make an informal loan which is being repaid on a monthly basis. She has a modest amount of capital left, which she hopes will soon be increased by an estimated £33,000 in legal costs which the court awarded her last September. She would like to know the best way to invest this money.
Her immediate plan is to move to a smaller property. 'My current home has three bedrooms and I hate cleaning,' she admits. She has just put in an offer for a bungalow nearer to her daughter. If it is accepted, she will put her property on the market. This will free up some more capital.
After moving, she estimates she will have another £10,000 left over from the sale of her house to invest.
She also expects her living expenses to go down when she is in a smaller home. Not that she has any trouble coping on her pension, she says. When she retired from teaching on ill-health grounds 10 years ago - after 16 years in the profession - her pension was enhanced and she has also inherited another pension from her late husband.
At present all her spare cash is in a variety of Halifax accounts. Last summer she tried dabbling in some shares but did not stay in the stock market for long. 'I couldn't stand the way the price of the shares kept going up and down, so I sold them. I found it too unsettling.' She made a £700 profit, but could have made more had she waited.
As a diabetes sufferer, she is convinced that she has not got much longer to live. 'I may have four or five goodish years left,' she says. During this time, she would very much like to pursue her passion for poetry. She has written poetry herself and is considering taking a university course. Getting a small car is also on her wish list.
While not hard up, she does not like wasting money. As health is a major concern, she feels she is not getting good value from her private medical insurance policy. 'It costs £132 a month and I've only used it occasionally. I wonder if I would be better off cancelling the policy and saving the premiums in a separate account to pay for consultations or treatment when I need them.'
Adviser 1: Dan Kemp
The first thing to look at is Joan's attitude to
investment risk. As she sold her shares because
she was uncomfortable with stock market risk, we
need to adopt a cautious strategy so she can
sleep at night.
Such an approach would mix guaranteed and
low-risk equity investments. It is important that
some low- risk equity holdings are included as
these are likely to achieve a better level of
growth than cash holdings over the long term. It is
necessary to take the longer term into account in
case Joan is still studying poetry in her eighties.
On the other hand it is clearly important that she
has enough capital available in the short term in
guaranteed/cash holdings to make the purchases
she wants and give her a level of financial
freedom. We therefore recommend a 60/40 split
between low-risk and guaranteed/cash
investments. This will enable Joan to have a lump
sum of around ?20,000 available to buy a new car.
We recommend that the cash is held in a
high-interest deposit account.
We would then recommend that she invests
?30,000 in long-term low- risk holdings such as
low-risk Isa with-profits bonds. There are a
number of companies, such as HSBC, offering
low-risk equity-based Isas, where the initial
capital investment is protected.
This is probably not a great time to cancel her
private medical insurance. As Joan gets older she
is likely to need this cover more.
Dan Kemp works for financial advisers Holden
Meehan.
Adviser 2: Gary Morris
If Joan is really convinced that she will not live
more than another five years, my
recommendation would be that she puts all her
funds on deposit. The time scale would not allow
for any reasonable 'investment' planning vehicle
to cover establishment costs and charges.
However, she should consider moving her cash
out of the Halifax to a more competitive account.
Birmingham Midshires Simply Save phone
account, for example, pays 6.5 per cent gross on
balances over ?5,000.
Assuming Joan enjoys the average life
expectancy for a lady of her years, she would
need to plan for at least another 19 years. She
may still wish to set aside a reasonable sum into
her easy access deposit account to enable her to,
say, attend poetry festivals. Placing ?15,000 into
the Birmingham Midshires account, for example,
would allow her to access funds six times a year
without affecting her interest rate. Another ?5,000
should be placed in her local building society
branch for easy access.
Given Joan's low risk threshold, the ideal
investment for her other funds would be a
with-profits investment bond. These capital
investment bonds use an annual bonus allocation
linked to a terminal bonus to smooth the peaks
and troughs of the investment markets for the
investor.
With regard to her private medical insurance, I
recommend that she keeps it for the regular
check-ups.
Gary Morris works for financial adviser Towry Law
Finance Services.
• Advice is for guidance only. Do you want to appear in Wealthcheck? Write,
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