Wealth Check: 'Will I be able to afford my dream home by the sea?'

George Gill is a caretaker for Greenwich Council in London. He bought his council flat four years ago for a discounted price of £97,000. He hopes to sell it for £180,000 within the next two years and move to the West Country, but worries that the cost of moving will not leave him enough money to afford his dream Cornish bungalow.

George would like to be able to buy a two or three-bedroom property by the sea for around £170,000. He would like to find out what it costs to sell a property.

In the longer term, he would also like to be able to work part-time and is keen to help his daughter put down a deposit on a property. He hopes to retire by 2017, at the age of 60.

We asked three independent financial advisers for their help: Drew Wotherspoon, of John Charcol; Ashley Clark, of Need An Adviser.com; and Anna Bowes, of AWD Group.

Case notes

George Gill, 49, caretaker, London
Salary: £19,000 a year.
Property: Flat worth £180,000 in Blackheath, south-east London.
Savings: £5,000.
Pension: Pays £100 a month. Been paying into a local authority scheme for 20 years. Pension fund is currently worth £21,607.
Monthly outgoings: £480 on bills, £228 on tax and £200 on savings and insurance cover.

PROPERTY

The costs involved in selling a property usually consist of two elements, Drew Wotherspoon says. First, there will be an estate agent fee to pay on sale of the property, and these usually range from 1 to 1.5 per cent. At 1 per cent the cost would be £1,800 on the type of property George is selling.

There are also legal fees, which are around £1,000, as well as survey fees. Stamp duty must also be paid on any new property worth more than £125,000. The valuation fee can vary - it can be anything up to £800 for a full structural survey. The stamp duty on a property of £170,000 would be charged at 1 per cent - equating to £1,700. This makes the total costs for a move in the region of £5,000.

Anna Bowes says George should note that if he is planning to sell after June 2007, there is also the cost of a Home Information Pack, which could cost over £500 plus VAT. But to save money she suggests he consider selling privately, through websites such as www. homesbyweb.co.uk, to avoid estate agent fees. Once he has sold his flat, Bowes is sure George will be able to find a property in Cornwall within his price range. But she warns that as the area is currently going through a property boom, he may need to compromise and buy a property inland.

RETIREMENT

Ashley Clark worries that George will have too much of his money invested in property when he retires. He points out that under the Community Care Act, people who have assets worth more than £21,000 including property, have to pay for their own social care in the event that they need long-term care in old age.

Contributions will be made towards medicines and health treatment, but you could have to pay more than £2,000 per month for full-time residential care. If you cannot afford to pay this out of your income, your local authority will pay but they may ask you to sell your home to fund care or place a legal charge over it, so that the day that you die, the property can be sold to refund care costs.

Clark suggests George should buy a normal home while he continues to work but, when he is ready to retire, he should sell up and hunt for a small holiday bungalow or static mobile home for around £45,000 and use the balance of money to enjoy retirement. George would not be allowed to be permanently resident but as long as he takes regular breaks away to visit relatives or holiday, he will not be breaking any rules. With the excess capital, George can have a great retirement and even if he is not keen on spending, he should consider making financial gifts to his daughter, Clark adds.

George is a member of the Local Authority Pension Scheme, which Bowes describes as a fantastic plan linked to his final earnings, based upon a fraction of 1/80th of his salary for each year that he is a member. He has worked for 20 years and this means a projected pension today of 20/80ths, that is £4,750.

Based on today's salary of £19,000, this gives a projected inflation-linked pension in 10 years of £7,125 a year, roughly a third of his salary, plus a tax-free lump sum of three times his pension - around £21,400.

Clark says George should work on in London for a few more years or seek employment in Cornwall, again with a local authority. That way, his pension benefits can be transferred, without penalties, from one local authority to another.

Bowes suggests George may want to consider making additional contributions to his pension, and should ask his employer about this.

Clark recommends George completes a BR19 State Pension Forecast form available from www.thepensionservice.gov.uk. It's free and will give him an idea of what his likely state pension will be.

SAVINGS

Clark recommends George invests his £5,000 in tax-efficient savings plans. He should top up his savings and invest £3,000 each in tax-free cash individual savings accounts for himself and his wife.

George should start to build up a nest egg of around £100 a month in an ING Direct Regular savings account at 4.5 per cent a year, Clark adds.