If she does decide to become self-employed she will have to set aside sufficient money to cover her setting up expenses and put more in the building society for day-to-day expenses until she is established.Solution 2: PensionMs Stephens paid into the NHS pension scheme for 25 years which is a generous scheme. There is also the possibility that she will rejoin the NHS in some capacity and resume payments. Nevertheless, she is apprehensive about taking things for granted regarding her retirement, especially since she is not sure what she is going to do next.Ms Elliott says that although Anne has a solid pension to look forward to from the NHS she will have created a “gap” by going earlier. She argues that Ms Stephens would be well advised to build up a separate savings pot now, while she is working as a locum.

Like everyone else in the UK under 75 she can contribute a lump sum of £2,808 (gross £3,600) each tax year into a new stakeholder pension regardless of any earnings. Or, if her earnings are high enough, she can pay up to 20 per cent and then 25 per cent of her earnings into this personal pension by using the age related relief rules. If she wants to catch up on last year’s unused allowance, built up between Christmas and the end of the last tax year, she can also make a payment before 31 January 2003. This will not only reduce her tax bill for this year and last year but also provide her with another source of income in retirement.Mr Jackson agrees that Ms Stephens should consider taking out a stakeholder pension, but before doing so should check the position with her NHS pension.Solution 3: MortgageMs Stephens is happy with her flat, bought in April 2001 for £120,000. Mr Farrant says a low-risk and tax-efficient option would be to reduce her mortgage. Their rates are typically higher than those of savings account, especially when income tax on savings is taken into account. A part-repayment would reduce interest outgoings to the lender.

But Ms Stephens should first check whether there are early-payment penalties on her mortgage.Ms Elliott agrees a reduction in her mortgage would improve cash flow and peace of mind. But the amount she paid would depend on the type of mortgage, and her longer-term plans, since repayment uses up funds and flexibility. Borrowing again might be difficult on her new variable income.. Private investors will see opaque with-profits investments become much easier to understand under new rules announced this week by the Financial Services Authority (FSA), the City watchdog. Moneynetmotorinsurancesearch Private investors will see opaque with-profits investments become much easier to understand under new rules announced this week by the Financial Services Authority (FSA), the City watchdog.
The guidelines require insurance companies, for the first time, to disclose much more information about how they decide what they will pay out in bonuses. They will also have to become much more transparent about the strength of their balance sheet.The changes, phased in over the next two years, have been caused by the unprecedented criticism of with-profits products in the wake of the crisis at Equitable Life, and the flood of warnings that many providers’ policies are not going to pay off endowment mortgages.These problems have focused the minds of consumers, and the regulator, on the fact that most people do not understand what they have bought when investing in a with-profits product. To combat the anger and allegations of mis-selling when things go wrong, the FSA said people must be given far more information.Sir Howard Davies, chairman of the FSA, said: “Before policy holders buy, they need to know how their money will be invested, the risks associated with that and the likely benefits, both guaranteed and discretionary.

After sale, they need to be kept informed of the pro-gress of their investment. They need to be confident their interests are to the fore when directors are making decisions about the operation of the fund.”The new information will be delivered as a type of manifesto, in which companies will have to set out how they “smooth” investment returns, by holding some of the return back in good years to pay a bit extra in bad ones. This process, which is meant to take away some of the volatility of investing in the stock market, is kept secret by most firms so policy holders have no way of deciding whether their company is being fair compared to another company.There are a few companies which already disclose a lot of information about smoothing, including Britain’s largest insurer, Norwich Union. The company tells customers that in normal years, it aims to pay out between 90 and 110 per cent of their asset share. Asset share is calculated by adding up premiums people have paid in plus the return on their investment, minus charges for management and other overheads.Prudential, another with-profits heavyweight, welcomed the new guidelines, saying it too was considering ways to explain smoothing to customers. Mark Wood, head of Prudential’s UK business, said: “One idea we are looking at is making explicit the charge for the hedge in a with-profits bond. At present, people are getting exposure to equities with a hedge that their return is not going to go up too far or down too low.