Don't forget to cancel the milk

Fancy a career break? Jeremy Davies looks at how you can stay in pocket

EVERY YEAR thousands of us return to work after an all-too-short summer holiday, pledging that soon we will take the year off we've been promising ourselves for so long. So why not make 1998 the year when you do something about it?

The first step is to work out how much to save - a process Kate Gill, the chief executive of the Institute of Financial Planning, calls "costing your aspirations".

This means estimating your travel, accommodation and living costs for the whole period you want to be away, and adding in all your commitments at home, such as mortgage payments, pensions and insurance policies. The total you arrive at should help you set a target for how much to set aside each month.

The longer you give yourself to save for your career break, the better. A preparation period of five years or more can allow you to maximise earnings from your savings by investing in unit trusts, PEPs or, after April 1999, individual savings accounts.

For most people, however, a two or three-year plan is more realistic, says Julie Lord, managing director of Cavendish Financial Management in Cardiff, who is a certified financial planner.

"You'll get a good return on your savings and have time to sort things out with your employer, perhaps even to arrange for a return to work when you get back, and to look into how leaving will affect things like health cover, life insurance and your pension situation," she explains.

If you want to get away within a year or less, a building society deposit account in which to stash short-term savings is probably the best bet.

Owning a house or flat commits you to monthly mortgage repayments while you are away, but can also help you fund a career break. Many people find it is possible to cover the mortgage or even generate income by taking in a lodger and/or renting out their home while they are away. Talk to local estate agents and scan the property pages of newspapers to work out a realistic rent.

At some point you will need to tell your employer of your plans. Some people are able to negotiate sabbaticals or return-to-work packages. Others find themselves facing what can feel like professional suicide, says Dr Wendy Hirsh, associate fellow of the Institute for Employment Studies.

Sabbaticals or "preferential reinstatement" mean staff can return to their own job or receive special consideration for other vacancies.

Some blue-chip private employers like Sainsbury's and NatWest allow for career breaks. Other firms may consider deals with individual employees - assuming, that is, they want to keep you. But many employers, a typical example being big City firms, are oblivious to the concept.

Even those that have a formal policy might still have a culture that militates against career breaks.

Dr Hirsh warns: "Just because employers have enabling policies doesn't necessarily mean it's easy for employees to take them up without damaging their careers.'

If you have saved enough for a break and you decide it is worth the risk, there are a few financial details it is sensible to sort out before picking up your passport and jumping on the next plane to paradise (see box).

Whatever you do, don't forget to cancel the milk and newspapers.

career break checklist

You must stop contributing to any personal pensions or freestanding AVCs if your eligible earnings stop. Write to the pension provider to explain your plans and ask for a contribution holiday. Remember any life insurance linked to the pension will also stop.

Check the conditions of any income-protection policies you hold. Some packages will allow you to take an extended break, but certain policies, such as critical illness insurance, can be invalidated if, for example, you travel into a war zone.

If you have any savings you are unlikely to need while away, you may want to transfer them into longer-notice accounts earning higher interest rates.

Make or update your will and arrange for someone at home to act on your behalf where financial matters are concerned.

Inform your local tax office of your plans. If you will have a proper address while away, give it to it. Remember you will face a fine if you are liable for tax but fail to fill in the necessary forms. Tax forms IR20, IRSB and IR140 summarise the tax situation for people travelling and working abroad.

Think about how you want to carry your money while abroad. Travellers' cheques might be the safe choice, but a debit or credit card might be more convenient. Talk to your bank about the various options.

If you are planning to be in one place for a long time, you may even want to set up an offshore banking facility.

Thanks to Frank Kionowski, a certified financial planner in Leeds.

taking a mortgage holiday

Flexible mortgages allow you to repay your loan at your own rate by increasing your monthly repayments or adding in lump sums as you go along. You can use the loan as an overdraft and, once you have built up sufficient capital, miss payments altogether. Payment holidays may be limited to six months. Most lenders offer only a variable rate flexi-mortgage, but some have a fixed option.

Flexible mortgage lenders include Bank of Scotland, John Charcol, Legal and General, Market Harborough Building Society, Mortgage Express, Mortgage Trust, Scottish Widows, Royal Bank of Scotland, Virgin and Woolwich Direct.

Thanks to Ray Boulger, manager at John Charcol mortgage advisers.