Adam Titcombe returned from serving in Iraq in December, just in time to spend
Christmas with his wife, Sam, two-year-old daughter, Chloe, and one-year-old
son, Harvey.
The 33-year-old naval officer spent six months in the heart of Baghdad, while
Sam, 31, stayed in their rented military accommodation home in Northwood,
Middlesex. Adam has been in the Navy for nearly ten years and is used to
travelling all over the world, but he says: “It is a lot harder to be away
in a warzone when you have two small children at home.”
While Adam was in Iraq he spent time off duty reviewing his finances online.
“There can be times when there is not much to do, so I went online a lot to
check and update accounts,” he says. This has left him with a plethora of
savings accounts and investments, but there is little coherence to his
financial planning.
Now he is back, he is getting on with his new role as a budget manager for
Nato and studying to become an accountant. But juggling a £500,000 budget
does not necessarily translate into skilful personal budgeting. “Things went
a bit awry over Christmas with all the present-buying,” Adam says. He has
£180 to pay off on his Marks & Spencer &More card and £280 on
his Barclaycard.
He is expecting a £2,000 bonus in the next few weeks, which he will use to pay
off the cards. He also wants to pay off a chunk of a Cahoot car loan for
£3,200 and his £500 overdraft, but he would like to use what is left to
treat the family to a few days out.
Adam earns a salary of £38,000. The couple pay rent of £200 a month but also
own a three-bedroom property in Plymouth, on which they have a £58,000
mortgage. They have a seven-year fixed rate of 4.99 per cent from Halifax,
which is not due to expire for another four years.
An interest in newspaper business pages has left Adam with a bewildering array
of savings and investments. He has a Skandia Life Equity Isa, worth £8,412,
an ICICI savings account and Barclays Regular Saver and e-saver accounts. He
drip-feeds cash into these accounts. Sam is a nontaxpayer and has £3,000 in
an Abbey cash Isa.
Adam’s share portfolio, invested in 16 companies, is worth £830. He invests
£10 a month into “whatever the experts recommend”. He has shares worth £200
in 3i, £60 in Banco Santander, £112 in easyJet, £60 in Tullow Oil, £45 in
IGP, £45 in Neutra-Health and £45 in Cash Point Machines UK.
The Titcombes also have a joint savings account with Alliance & Leicester
attached to an A&L current account. They have another account with
Barclays and a third with First Direct, linked to a First Direct savings
account. Adam invests £10 a month in a Nationwide stakeholder Child Trust
Fund for Chloe, while £10 a month goes into a Children’s Mutual account for
Harvey. A further £25 a month for each goes into a Jump account.
Adam has an Armed Forces final-salary pension and a £3,000 pension pot with
Skandia. He would like to open another private pension if he can afford it.
He is also paying £50 into an endowment with Lincoln Mutual, which will pay
out when he reaches 50. Sam has a small pension with Scottish Widows.
Both Adam and Sam have single-life insurance policies with Legal & General
that pay out £100,000 on death. Adam has an additional Norwich Union policy
for £12,000 of cover, into which he pays £3 a month. A further £15 a month
goes into a policy with PAX, the military insurer. The family also has BUPA
health cover, costing £97 a month.
Adam says: “I am worried about stopping and starting, so I drip-feed small
amounts into many accounts. I would consolidate if it made me better off. I
would also like to know if I have doubled up on policies.”
The Titcombes: what the experts say
SAVINGS & INVESTMENTS
Mark Dampier, head of research, Hargreaves Lansdown
“I am not sure where to start. Adam is right to criticise his budgeting. There
is little point in saving if you end up using your overdraft and credit
cards. They need to work out expenses to see what is left for long-term
investment and short-term savings.
“I am wary of regular savings plans with high headline rates as they do not
give this amount over the year. Putting cash in Sam’s name would be sensible
as she doesn’t pay tax. A Birmingham Midshires direct telephone savings
account pays 5.25 per cent, although ICICI is a good online account. They
should aim for £15,000 in cash.
“The longer-term investments are totally overdiversified. There is no point
putting such small amounts into shares as it can mean lower returns.
Instead, he could build a foundation with unit trusts. Adam should also add
to the Isa and build up the funds he has.
“He should concentrate on three or four funds — any of those he already has.
He should have no more than 20 in total. Adam should sell the equity
portfolio, add it to the maxi-Isa portfolio and build on it. He should do
the same with the Skandia personal pension. Instead of a diversified
portfolio, he could buy a fund
of funds, such as Skandia’s UK Best Ideas Fund.
“Adam should switch the Child Trust Funds (CTFs) to pure equities, such as the
Children’s Mutual account, using Invesco Perpetual Income.”
SAVINGS & INVESTMENTS 2
Darius McDermott, managing director, Chelsea Financial Services
“Adam needs to do a bit of financial pruning, cutting the number of current
and linked savings accounts to two: a current account and savings account.
They could switch the Barclays savings account to one paying 5.35 per cent
with Abbey, which also has a competitive current account. I would keep the
Barclays Regular Saver account paying 10 per cent.
“A proper investment portfolio is also important. He can use cash Isa money as
an emergency fund, but it would be worth creating a portfolio based on unit
trusts to sit between the higher-risk stocks and lower-risk cash Isas.
“A good plan would be to add to his existing Skandia equity Isa with balanced
growth funds, such as Artemis European Growth, AXA Framlington UK Smaller
Companies, Aegon Corporate Bond, Legg Mason US Equity, Merrill Lynch UK
Dynamic and M&G Recovery. And the CTFs should be invested in stocks and
shares instead of cash.”
PENSIONS
Dean McCarthy, director, Cobalt Capital
“Before Adam thinks about additional contributions, he should clear his debts,
either through his bonus or by drawing on savings.
“The Armed Forces scheme is excellent, but he needs to think about how much
income he wants in retirement, then work out what his current provisions are
projected to provide. If there is a shortfall, Adam can contribute up to 100
per cent of his income into pension schemes each year, if he wanted, under
the new rules. Once the shortfall is known, it will be possible to provide a
cost analysis of how it can be bridged.
“The Skandia pension is excellent if Adam wants to access a wide range of
funds across different asset classes and risk categories. It is not,
however, the most competitive in terms of charges.
“Before making any further contributions, Adam should consider what is most
important: lower charges or a wide investment choice. He could also make
additional contributions to his Armed Forces scheme.”
PROTECTION
Kevin Carr, head of protection strategy, Lifesearch
“Now that Adam is in an office job he should check whether this has any impact
on the PAX policy. It is good that Adam and Sam have separate life policies,
although they should check that the policies have been written under trust,
which avoids inheritance tax and speeds the payment.
“Sam could consider housepersons’ income protection, which allows those
without an income to insure a long-term income of up to £15,000 a year in
the event of ill health. This could be spent on childcare, rehabilitation
and general costs of living. Adam should also consider income protection,
especially as he is the only earner.
“For Sam, cover of £1,000 a month to age 60 would cost from £20 a month with
Liverpool Victoria. And presuming that Adam’s role is now purely
administrative, £1,000 a month of benefit to age 60 would cost £13 a month,
also with Liverpool Victoria.
“The couple may wish to consider taking out additional life cover. An extra
£150,000 over 25 years to cover both lives would cost £17 a month with
Norwich Union.”
Adam’s response
“It was a nice distraction from the bangs and bombs to go through the various
websites to check fund and share prices and even bank balances. But the
experts are right, there is no reason to have so many financial loose ends.
I needed someone to make me see sense.
“Following the consensus of advice and, in fairness, doing the blindingly
obvious, I think we will rationalise our current accounts. We will also
reassess our budget so that we prioritise repaying the remaining flexible
loan. Once we are back to being loan-free, I will follow Darius’s guidance
to start a medium-risk unit trust portfolio.
“We won’t consider further protection cover for now, as we think we are
covered. I hope we don’t regret that decision. I am grateful for Dean’s
reassurance about my pension. And while I will follow some of Mark’s advice
and not add to my share portfolio, I will hang on to it. It keeps me
interested in the stock market and I like to have this selfish reason to
read the business news pages.”
Over to you
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