Wife next door seeks fun and travel

Suuske Verwaal
Age: 52
Lives in: West Bromwich
Occupation: Social worker
Earns: ?25,473 a year, with award pending to ?26,800
Mortgage: None
Debts: Interest-free car loan
Investments: Cash Isas, equity Isas, with-profits policy, endowments shared with ex-husband
Pensions: Reduced state pension and local authority scheme
Aims: A comfortable retirement and a mobile home

Suuske Verwaal and Frederick Devereux are married, but live in two adjacent, self-contained flats.

Frederick already owned one of them when he moved into Suuske's house with her four children. The youngest is still at school and another is at university.

The stairs and garden were a problem because Frederick has the serious back condition, spina bifida. They started looking for a new flat large enough for them all, but 'the prices were absolutely astronomical', says Suuske.

Then the flat next door to Frederick's came on the market, providing the solution. They live in one and spill over into the other. 'We pay two lots of council tax and two water rates but it still works out cheaper,' she says.

They are keeping the flats separate because they will eventually sell them. Suuske wants to return to the Netherlands.

She must keep working, probably until she is 65, because she does not have much pension: 'Divorce is not a very good thing for one's finances.' Their marriage is the second for both of them.

Before divorcing, she paid the married women's national insurance stamp. As a peripatetic primary school music teacher for 20 years, she had no chance to join the pension scheme.

At 42, she changed career to go into social work. 'I am now a senior practitioner and social worker still working for a local authority.' She hopes she can buy back some missing pension years.

Suuske now saves as much as she can: 'I have this nightmare about being a really poor pensioner. Because I work in this field, I see them every day.'

Then share prices slumped, increasing her insecurity. 'The more I saved, the more I worried and I thought: why am I doing all this?' she says.

On a recent holiday, she decided they ought to start enjoying themselves now: 'My husband is nine years older than me and we had thought we would do all this when I retire, but he will be 74 by then and he might not be in a position to.'

Already keen caravanners, they now plan to buy a new towing caravan or a motor caravan to travel around Europe the summer after next: 'In a year's time, I will have my car paid for, so I will have another £250 a month. We will probably spend between £20,000 and £25,000 on a mobile home.'

So she wants to change her savings habits. She says: 'I read a fair amount about personal finance, and after so much reading I can't understand anything any more.'

Adviser 1: Anna Bowes

A stakeholder pension would work well for Suuske. We recommend Standard Life or Clerical Medical.

With more than five years until retirement, she could consider an equity-linked fund, which should provide a better return than investing in cash, although there are no guarantees. For minimum risk, however, she can use either a with-profits or a deposit fund.

As Suuske and Frederick intend to travel and she wants to give her son ?3,000 when he goes to university, she needs to build up a deposit account. She can put up to ?3,000 a year into a mini cash Isa. Cheltenham & Gloucester, which pays interest of 4.50 per cent, is one of the best.

If she wants to save more, internet-based accounts offer the best rates. She could get 4.35 per cent gross on her savings via www.northernrock.co.uk.

She should remember that, as she has been investing monthly, her ?400 has been buying more units as the price has fallen.

She should buy back the five and a half years' local authority pension, but she should not delay taking her state pension as the small rise would not radically alter their lifestyle and the money could be of more use sooner.

When her endowments mature in 2011, she will have a clearer idea of her retirement income. She can invest this money to provide income or capital growth. Or she can spend it.

Anna Bowes works for the Bath-based Chase de Vere.

Adviser 2: Ken Stewart

Topping up her pension with a stakeholder plan would benefit Suuske. She could go on contributing beyond retirement or retire early.

She and Frederick should continue to invest in Isas to complement their pensions. I recommend they both have two mini Isas, one for cash such as Northern Rock, paying 4.8 per cent, and one in longer-term assets such as equities and bonds. Half their money is then protected in cash and could be used towards the motor home and they could gain from any rise in the markets.

The equity Isa could be invested in a diversified fund of funds, such as Premier's Selector Income.

Suuske's suggestion that she start a private medical plan, probably with Saga, is sound, especially as they intend to travel.

Suuske and her first husband could assign a joint policy to each of them, paying the premium for only one plan and owning the benefits on maturity outright. If either dies before maturity, the funds pass to the remaining ex-spouse. These plans should be held in trust so their children are the beneficiaries. There is no need to assign the policies in this case, as the benefits go to their children at maturity or when either parent dies.

The cash Isa should have priority, with the stakeholder plan and the equity Isa second and third.

Ken Stewart is a financial planner for Horwath Clark Whitehill Financial Services.

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