Wanted: help after crises

Val Somerton-Rayner
Age: 62
Lives in: Old Bosham, West Sussex
Occupation: Looking for a new career
Earns: Nothing
Mortgage: None
Debts: None
Investments: ?100,000 in unit trusts, Isas and
bonds; ?15,000 on deposit
Pensions: State pension; private one waiting
Aim: To provide income until she is 100

Life has turned upside down for Val Somerton-Rayner in the past 18 months. She was divorced last year and her ex-husband suffered a massive stroke which has left him in a nursing home. 'I cannot abandon him and I see him at least once a week,' says Val. She was made redundant by a dotcom firm last August.

Val has not worked since but she has completed the first year of an arts and humanities degree specialising in creative writing and literary history and is studying to teach English as a foreign language.

This has won her work this summer which pays £2,500. She wants to use the money to visit her grandchildren in Barcelona: 'I want to have fun and not have to rely on the money to exist from day to day.'

Val, who is 62, needs more permanent work. 'I am seeking other jobs, such as assistant carer at a residential home, working for the local theatre, promotional work and full-time teaching. I have had several interviews and am awaiting news, but I fear my age is against me, though I am extremely fit and have no wish to retire.'

So she has other money-raising ideas - 'from doing bed and breakfast or letting a room, to writing articles and books, to teaching English, to caring for the elderly'.

She has written short stories, plays and poetry, though she recognises that paid writing 'is difficult to break into'.

Her investments and state pension give her only just enough to live on. She is trying to decide whether to invest the £15,000 she has on deposit or use it to extend her house. She may then go into an equity release scheme, first extending the house to mak it worth more. Until she finds regular work, she is living on her capital. From the divorce settlement, she had enough to buy a house outright, with a lump sum left over. This she invested last March to supplement her income. 'With the stock market so volatile I am worried about whether I did the right thing.'

She has been advised to invest her pension capital in the HSBC high income plan and the £15,000 in the Rothschild Five Arrows Private Portfolio Service, but she is hesitating. Her intention is to secure her long-term future by investing for monthly income and capital growth: 'I want to be assured of a regular income of at least £1,000 a month after tax for the rest of my life.'

She expects to live a long time: 'It's sensible to assume the worst: that I may live until I'm about 100.'

Adviser 1: Carolyn Corless

Val's financial planning is dictated by her
employment status. Earmarking her summer
earnings for holidays leaves nothing for living
costs. Meanwhile, she cannot commit to another
employer.

She should keep her options open, and place the
capital in an instant access account .

If Val finds a job, she will not need to draw her
pensions nor take income from her investments,
so can invest for growth with the option of income
if finding a job is difficult.

Her income is ?9,500 a year, whereas she needs
?12,000 net. Interest makes up the shortfall.
Pensions could add another ?2,000 gross. Val
does not have the option of investing the pension
funds into HSBC's High Income Plan. She has too
little for income drawdown or phased retirement,
so she must buy an annuity, now or later,
depending on whether she finds a job.

I do not advise tying up more capital in property.
Although the returns look attractive, property is
illiquid and income depends on a constant supply
of good tenants.

The investments made last March are long term
and should be left. Though not all are suitable for
a cautious investor, they are good funds which
should provide decent returns in the medium to
long term.

I would not recommend the Five Arrows Portfolio
to her, as it is not for the cautious investor.

Carolyn Corless is a certified financial planner with
Sully's Financial Planning.

Adviser 2: Donna Bradshaw

OVERALL, Val has chosen her investments well,
although there is scope for some tweaking. If
there are no penalties, she should move the
?45,000 in the Bank of Scotland Bond. This is too
much to keep on deposit, and the return is not
competitive. She should reinvest in a combination
of with-profits and distribution bonds.

The Rothschild route it is too risky. My advice is to
keep around ?6,000 in an instant access deposit
account, invest a further ?7,000 in a maxi-Isa in a
combination of funds to provide income and
growth (fund supermarkets are ideal) and add the
remaining ?2,000 to the ?45,000 going in to bonds.
Val cannot put this money into a high-income
plan and draw money from it unless it is a
pension drawdown plan, and I do not recommend
this. If she needs an income from her pensions
immediately, she should shop around for the best
annuity rate.

Before renting, she must decide whether she
really needs an extension to take in a lodger, and
check the cost of building work, making sure she
adds a generous margin. The loss of income from
using up her capital may not be adequately made
up by rental income. Perhaps she could try a
lodger in a spare room for a short period to see
how she gets on. Equity release is something to
consider when she is much older, in at least her
late Seventies.

Donna Bradshaw is a director of Fiona Price &
Partners.

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