Christians out of the lions' den

Financial adviser Amanda Davidson finds solutions for a family with three teenagers to educate

NAMES: John and Angie Beresford

AGE: Mid-40s

OCCUPATIONS: Electrical engineer and special needs teacher

BACKGROUND: John and Angie have three teenage daughters aged 13, 15 and 17. He earns pounds 32,000 and she earns pounds 23,000. Angie is about to change job and there will be a change to her pension scheme. As there is no "transfer club" she is wondering what to do with her current pension arrangements in the Teachers' Pension Scheme and also what contributions she should pay in future.

John has a money purchase arrangement with his current firm and a pension transferred from his previous employment into Norwich Union.

They shortly will be receiving a lump sum of pounds 25,000 from a maturing endowment policy. After paying off the loans and carrying out work on the property, they will be left with pounds 15,000. Their main priority is to see that their children should have the opportunity to go to university.

They have a small amount of their investments in ethical funds. As practising Christians this is a consideration for their future investments.

THE ADVISER: Amanda Davidson, a partner at Holden Meehan, independent financial advisers in London.

THE ADVICE: Until John and Angie have decided what to do with their investment, they should put it into a building society account. This should be a postal account such as that operated by Cheltenham and Gloucester in their direct 30 account which will give a gross interest rate of 5.9 per cent or the Chelsea Post-tel 20-day account, giving 6.05 per cent gross.

The building society money should be held in Angie's name as she is a basic rate taxpayer. They should definitely pay off two personal loans they have. This will also release pounds 200 a month which they could invest into further savings. They should check that there are no early repayment penalties.

To provide their daughters with pounds 3,000 a year in real terms for three years of university education each, they will need roughly pounds 9,000 for their eldest daughter. The second daughter will require the remaining pounds 6,000 plus pounds 50 a month savings and the youngest will require pounds 150 a month saved between now and when she first starts at university. Thus the Beresfords should be looking at investing the full pounds 15,000 for their daughters' education, plus the pounds 200 a month they can now save.

John has a PEP with Friends Provident which contains some ethical investment. He could pay the pounds 200 a month into this PEP. The remaining pounds 100 a month should be invested in a Tessa. This spreads risk by opting for a more cautious approach than just a PEP.

As to the remaining lump sum, bearing in mind that pounds 9,000 will be needed for the first daughter in a relatively short space of time, I would recommend that they put pounds 6,000 in the building society once again held in Angie's name.

As far as the pounds 6,000 for the second daughter is concerned, this could be invested in a slightly freer way. Angie has no PEP at the moment, so it would be sensible to use up her PEP allowance.

If they were not concerned about an ethical choice, then I recommend a company such as Fidelity or Perpetual.

From their building society investments and their Halifax mortgage, John and Angie can expect some shares. Curiously these may be put into a PEP on top of their normal allowances of pounds 9,000 per annum each. This must be done within 42 days of the issue of the shares. I recommend that they hold on to the Halifax shares and that they do put them into a PEP. John is a higher rate taxpayer and this makes sense. These shares could also be used to top up any funds that might be needed at university.

They have a part-endowment mortgage and a part-repayment mortgage with Halifax. The repayment mortgage is not covered by any separate life assurance. Life assurance for Angie would not cost a lot as they would only need it for a short period of time. An eight-year term assurance for pounds 50,000 would cost Angie pounds 9.30 a month.

Angie has a new pension scheme to consider. She needs to get details and look thoroughly at what she is entitled to. She has 12 years' service in the Teachers' Pension Scheme, which has very good benefits. She needs to think carefully if she is to move this away from its secure environment.

On the calculations that I have done, Angie needs contributions of about 20 per cent of her income to achieve an overall pension of 40 per cent of her current salary including benefits. Thus if the contributions from her new employer are less than the 20 per cent, she needs to think carefully about making this up.

John's pension situation is quite healthy. On his current arrangements, he can look forward to a little under 60 per cent of his final salary at retirement. He has his previous employer's scheme transferred to a Norwich Union Personal Pension Plan. It has a value of pounds 105,000. But if he were to die, Angie would receive only pounds 15,000 as a return of the original investment. If he wishes to change this, he can contact Norwich Union.

John also contracted out a Serps with a separate Scottish Widows policy. He is now at an age where he needs to consider carefully whether he wishes to remain contracted out. For the moment I would stay contracted out. Changes in the rebates mean the sensitive age has risen and will now be around 50 for men.

THE VERDICT: "Amanda's summary captures the situation perfectly. There are still some unanswered questions but she has given super advice that we shall certainly act upon. Our primary concern is to be good stewards of the resources God has given us.

"So it is pleasing that Amanda feels our financial future is reasonably secure. Her advice with regards to the children is excellent while putting accounts in Angie's name to avoid tax liability is a masterstroke."