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Robin Stanley
Age: 27
Lives in: West London
Occupation: Photographer
Earns: ?18,000
Mortgage: None
Debts: ?2,800
Investments: ?5,000 in savings account; ?3,000 in
cash Isa; ?3,000 in shares
Pension: None
Aims: Pay off bank loan, set up pension, save for
deposit on flat/studio space, travel more
Ideally, Robin Stanley would like to work as a photo-journalist. He tried it on a freelance basis a couple of years ago, going off to Kosovo to photograph mine clearance, British troops and UN operations.
He says: 'I had a fairly wild time, but I found it very difficult to make a living so I eventually decided to come back to London and set up my own company.'
Robin started taking photographs as a hobby while he was studying history of art and design at university. When he graduated in 1997, he landed a job as a production assistant at Sky News, where he worked for about 18 months. He continued taking photographs in his holidays.
He then found a job as a photographer's assistant and gradually started building up contacts and branching out on his own. After the foray into photo-journalism, he moved into commercial photography and, a year ago, set up his own company. He is now so busy that he employs a small team to work with him on a freelance basis, providing photographic services to PR and events companies.
Robin is a sole trader. His company profits at the moment are about £35,000 a year, from which he draws an income of £18,000. The remaining money is used to buy new technology, digital cameras and computers. He expects this to be an on-going process: 'Such is the nature of the photographic business nowadays that equipment rapidly becomes obsolete.'
He is still paying off his £300 remaining student loan at £26 a month and has interest-free credit for £2,000, which he took out to purchase photo and computer equipment. He intends to pay this off in five months' time, when the interest-free period expires.
Although he has £5,000 in a savings account, he points out that this is money set aside to pay his next tax bill. He also has around £3,000 invested in the shares of EMI, Paragon and SkyPharma, which he purchased when he working at Sky, and £3,000 in a a mini cash Isa at Abbey National.
Like many young people nowadays, his main concerns apart from building up his business are a pension and mortgage. He would like to start a pension but does not know where to put his money. He says: 'I do not want anything too high risk'.
Robin currently lives and works from a rented flat he shares with his sister, but he feels rent is money wasted and would like to buy his own flat-cum-studio-cum-office as soon as possible, probably in the East London, where property is cheaper.
He is not quite sure where he would stand getting a mortgage as a self-employed person. And he will still want to have enough money to travel once or twice a year so he can take good photos 'for the love of it'.
Adviser 1: Gillian Cardy
Most mortgage lenders want self-employed
people to provide two years' accounts, with
projections for a third year as a minimum : they
are looking for positive cashflow and rising
profits. Normal criteria would be three times net
profit - but some lenders offer loans without
evidence of income at all.
In the meantime, Robin needs to save for a
deposit: he should look to save 10 per cent of the
purchase price, plus costs. This is likely to give
him the best choice of loans. Given the nature of
his business, he may prefer a fixed-rate mortgage
for three years or more, so his payments remain
stable even if his business profits fluctuate. Or he
could consider a mortgage where savings are
offset against borrowings.
As he currently has no pension, he needs to start
thinking seriously about his retirement plans - at
what age he wants to stop working and on what
level of income. Pensions are not necessarily the
best thing; a combination of pensions and Isas is
more flexible. Once money is inside a pension, it
cannot be taken out again.
A stakeholder plan would meet his needs for the
time being. He can invest up to ?3,600 each tax
year, regardless of profits. A low-risk option would
be a with-profits scheme.
He also needs to think about protecting his health
so that if he did suffer a long-term illness, his
cashflow would be maintained. Income protection
insurance may be expensive, but it could prove
invaluable.
Gillian Cardy works for financial adviser
Professional Partnerships.
Adviser 2: Bruce Maskell
Bearing in mind his business plans, Robin's
pension planning needs to be flexible. A
stakeholder pension is likely to be his best option:
these are not only low-cost, but will allow him to
stop and start contributions without penalty. He
will get tax relief on his contributions and the
funds will grow in a tax-efficient way.
If Robin does not want much risk, there are plenty
of medium/low-risk funds. Leading providers
include Standard Life, Clerical Medical and
Scottish Widows.
He could start with regular monthly savings and
top up his contributions any time when his
business has a particularly good year. The fund
could be transferred without penalty to a
self-invested personal pension, or a small
self-administered scheme, which would allow him
the flexibility to use his pension funds to further
his business.
For self-employed mortgage applicants, a normal
requirement is three years' accounts.
Alternatively, Robin could consider a 'non status'
mortgage, where ability to pay is the criteria
rather than income. These are now available
from mainstream lenders.
Building up a deposit is vital, and a mini-cash Isa
is a suitable savings vehicle for this. Robin can
put in up to ?3,000 per tax year and the interest is
tax-free. Rates in excess of 4 per cent are paid on
cash Isas by Cheltenham & Gloucester and
Intelligent Finance, among others. He could also
consider selling his share portfolio to form part of
his property deposit.
Bruce Maskell works for financial adviser Maskell
Moss.
· 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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