Q: I have a fair bit in savings but I’m getting no interest on my money. I am nervous about the volatile stock market. How do I get a return on my money without the risk of losing it all?
A: With interest rates at historic lows, things are great for borrowers but terrible for savers. One strategy may be to decide how much money you can set aside for the long term. Some of that could be invested in a risk investment such as a stocks and shares ISA. There is a wide choice out there and it may be worth engaging with a financial adviser to help you assess your risk appetite and match you to a suitable investment. It is however very difficult to get decent a return these days without risk. Other options may include National Savings and Investments (NS&I) and long-term fixed rate bonds. None of these are likely to give you a return greater than inflation.
Q: My new employer operates a group pension scheme and I am eligible to join it straight away. They will match my contribution of 5% of my salary. I don’t intend to stay there very long – should I join the scheme or not bother?
A: Join the pension scheme. Many people envisage that they will not stay with an employer very long only to end up being there for 10 years! If that happened in your case, you would be very pleased to have made the decision to join. If indeed you do leave your employer say within two years of service, you will have the option of transferring the value of your pension fund to a new pension plan of your choosing, such as your own personal pension plan or to a new employer’s pension scheme. You also have the choice of a refund of your contributions if you stay for a very short period. The drawback here is that the refund may be taxable and only your own personal contributions will be returned. Either way, the choice is clear. Join the pension scheme. You have nothing to lose.
Q: I have an interest only mortgage with no repayment vehicle and only ten years left until retirement. What should I do?
Many borrowers set up interest only mortgages as a temporary measure to reduce their outgoings in the early years intending to convert to capital repayment at some stage in the in future; typically, realising they had a problem when it was too late! Speak to your lender and establish what options you have. They may be able to extend your mortgage term into retirement which would allow you to convert it to a longer term, affordable, capital repayment mortgage. If not, there may be other lenders out there who would consider it, so perhaps a o speak to a mortgage broker. Many people in this situation are forced to downsize, a strategy worth considering where appropriate.
Q: I have recently left my job and set up my own business. What should I do to ensure my financial security?
A typical employed role would include the security of sick pay, death in service and a workplace pension as a minimum. You’ll lose all of that when you go self employed so you must replace those benefits. Sick pay can be replaced with an income protection insurance policy, death in service may be replaced with life insurance policy and your workplace pension replaced with a personal pension. Setting up some of these may be tax deductible as business expenses but choosing the right amount of cover isn’t an easy task. I would recommend speaking to an independent financial adviser who would be able to recommend the right amounts of cover for you based on your personal circumstances.