|
Hege Soholt
Age: 30
Lives: in South London
Occupation: Financial manager
Earns: ?32,000
Mortgage: None
Debts: ?200 on credit card
Savings and investments: ?4,000 in savings account
Pension: None
Aims: To buy a flat and start saving for the long term,
particularly towards a pension
Hege's parents are Norwegian, but she has spent most of her life in England and is about to put down even firmer roots here when she and her boyfriend buy a flat together later this year. They are saving for a deposit and Hege does not foresee any problems in that area: 'We are not going to overstretch ourselves.'
At the moment, she is more concerned about her longer-term security, particularly her lack of a pension. She regrets not having done anything about it earlier: 'Now I am 30, I feel I may have lost valuable time.'
In fact she was a member of an occupational pension scheme in her previous job, but felt she got a poor deal when she left. She explains: 'Because I worked for the company for less than two years, I was given a cash refund of my pension contributions when I left. The amount I got back was considerably less than I had paid in. I felt I'd been stung.' She admits the £300 refund was soon spent.
Once bitten twice shy, she decided against joining her present employer's pension scheme. 'At the time, I wasn't planning to stay that long because I wanted to go travelling.' But she didn't put any money into an alternative pension plan either and what's more she didn't leave her job because she managed to negotiate six months' unpaid leave to go off on her travels. Now back, she says: 'I am kicking myself for not having joined the pension scheme in the first place.'
She wants to make up for lost time with her pension. Yet she is still reluctant to join her employer's scheme and wonders if she would be better off with a stakeholder pension. Although she is happy in her job and has no intention of leaving in the near future, she feels having her own stakeholder scheme would give her more flexibility.
She wonders whether she could join her employer's scheme and take out a stakeholder. But she would like to know if there is an alternative way to save for her retirement. 'I am thinking about getting an individual savings account and would like to invest a small amount in shares. I have also thought about buying a property to let instead of tak ing out a pension, because it would give me more freedom.'
Once she and her boyfriend have bought a flat (she is saving around £1,000 a month towards the deposit) and she has paid her credit card bill, she feels she could save a significant amount. She has no other debts: she recently bought a car for £2,500, but paid cash. 'I am keen to get my finances sorted. Having no long-term investments or pension makes me feel especially insecure.'
Adviser 1: Gordon Wilson
As Hege plans to put down some roots, she
should be saving for the short, medium and
longer term. In the short term I would advise her
to save as much as possible in a bank or building
society. Postal and internet accounts offer the
best rates. Hege should use her mini cash Isa
allowance of ?3,000 each tax year. This offers
tax-free interest, no risk and instant access -
essential when you're buying property.
The second issue is her pension. I would normally
recommend joining an occupational scheme. The
company usually contributes at the same level as
the employee or higher. It is not uncommon for
companies to pay 5 per cent of salary. If Hege
does not join the scheme, she may be handing
back ?1,500 a year.
She may be eligible to contribute to a
stakeholder. Anyone with P60 earnings of less
than ?30,000 a year can contribute up to ?3,600 a
year gross and be a member of a pension
scheme. The main advantage of pensions is tax
relief on contributions.
For the medium term, I would recommend unit
trusts, investment trusts or Oeics. Hege could save
regularly in holdings such as Fidelity
International; L&G's Index Tracker Trust and
Aberdeen Fixed Interest.
Buy-to-let is high risk as it involves borrowing to
invest. If values fall, Hege has a debt, not an
asset.
Gordon Wilson works for financial adviser
Thomson & Shepherd.
Adviser 2: Gillian Cardy
It is always good advice to join an employer's
pension scheme. Not only does this build up
pension entitlement, it also makes you eligible for
other valuable benefits such as life insurance or a
pension in the event of long-term ill health.
Hege should not be disillusioned about the
amount she got back from her previous employer:
she made contributions but also paid less tax -
what you get back corrects the tax position.
She could still use a stakeholder if her income
less contributions to her employer's scheme is
below ?30,000. However, if she joins her
employer's scheme, she could make extra
retirement provision by using Isas. This will build
up a more flexible tax-effi cient fund, which could
be used for other purposes.
I would not recommend Hege buys property to let.
This would concentrate all her assets, and
liabilities, as she would have to borrow to
purchase the property. Any surplus income from
the rent would be taxable (probably at 40 per
cent), and when the property is sold there will be
a potential capital gains tax liability, too.
I suggest that she and her boyfriend complete
their house purchase then, when she has a clear
idea of her outgoings, she should rework her
budget and only then decide how much she can
afford to save.
Gillian Cardy works for financial adviser
Professional Partnerships
· Advice is for guidance only. Do you want to appear in Wealthcheck? Write,
with day and evening phone numbers, a brief list
of circumstances and any investments, to:
Wealthcheck, The Observer, 119 Farringdon
Road, London EC1R 3ER, or email: cash@observer.co.uk. You must be prepared to be
interviewed and photographed.
|
Latest press releases 
