Wealth Check: 'How can I save money for my son's university fees?'

Gina Musa works as a parent partnership co-ordinator for a local authority, giving support and information on education to parents of children with special needs.

Gina Musa works as a parent partnership co-ordinator for a local authority, giving support and information on education to parents of children with special needs.

Her son will be sitting GCSEs next year and wants to go to a performing arts school and possibly on to further education. Ms Musa wants to know how to invest the money from her maturing savings plan over the next three to four years, so it can go towards her son's college costs, and what she should do with her Barclays shares.

She also wants to know whether to move her pension monies into the local government schemes. She hopes to work in an area closer to her outside interests once her son is at college and would consider moving to a smaller property to finance this.

GINA MUSA, 48, PARENT PARTNERSHIP CO-ORDINATOR

Education: Teacher training; diploma in counselling

Salary: £25,000

Debt: Credit card paid off each month

Property: Five-year fixed mortgage at 5.59 per cent

Savings: Cash Isa (about £4,000). Savings policy of about £7,500 that matures in June; 111 Barclays shares.

Pension: Local government pension scheme since 1999. Pension from teaching and private pension.

Outgoings: Standing orders, about £800 a month; others, about £600 a month

We put her case to Patrick Connolly at John Scott & Partners, Vivienne Starkey at Equal Partners and Caroline Anstee of Fiona Price.

SAVINGS

Ms Musa will need access to the money from her savings plan quite soon, so a cash account is the only sensible option. Three to four years is too short of a timescale for investment in the markets.

Mr Connolly says that Ms Musa should first use up her cash Isa allowances (£3,000 in this tax year) and then get a competitive deposit account for the rest. He recommends Marks & Spencer (4.5 per cent) or Abbey's postal Isa (4.6 per cent) for the tax-free funds and ING Direct (4.41 per cent) for the balance.

Ms Starkey suggests Intelligent Finance for the Isa (4.6 per cent), as a savings bank with consistently competitive rates. She sounds a note of caution about accounts that offer introductory bonuses: they pay more up front but might not be competitive after the bonus rate ends.

SHARES

Given that Ms Musa has no other equity investments, her Barclays shares (worth about £500 at the moment) represent a relatively high-risk investment. Mr Connolly suggests that if Ms Musa does want to keep some exposure to the markets, a collective investment such as a unit or investment trust would suit her better. If that is too much risk, then she should sell the shares and put the money into a deposit account.

Ms Starkey points out that selling through a flat fee dealing service is the cheapest way to realise the capital.

PENSION

Ms Anstee points out that Ms Musa is in a fortunate position as a member of the local government pension scheme. Ms Musa might even want to use some of the money from her savings plan to top up her local government pension, as this will build up her entitlement and provide a cushion, should she go freelance. Transferring the private pension will depend on whether the local government scheme will accept it; there might be exit penalties. Ms Starkey says that the pension is likely to be an old-style scheme with quite high charges. An alternative might be to change to a stakeholder plan.

Consolidating her public-sector pensions should be easier, and she can add her years of service from teaching to her current arrangements. As long as her current salary is higher than her teaching salary, this is worth considering,

COLLEGE FEES

If Ms Musa's son does go on to higher education, he will have to pay university fees (£3,000 a year under the Government's proposed top-up fees). If Ms Musa does move to a cheaper house this will free up funds, but in the meantime, Ms Starkey says it is important to save as much as possible.

MORTGAGE AND PROPERTY

Ms Anstee suggests that Ms Musa might want to review her mortgage arrangements to see if a better deal is on offer. But she cautions that there might be penalties on her current, fixed-rate loan. Those penalties, Ms Starkey says, could outweigh any savings.

Although moving house will free up capital, Ms Starkey has an alternative suggestion. If there is space in the house when her son moves out, Ms Musa could consider letting a room. Under the Government's Rent a Room scheme, the first £4,250 of annual rent is tax free.