Personal Finance (BAF-6-PFI) Coursework Assignment 2015/2016 Yasmin Bartok The following information is available as of 20th January 2016: Yasmin Bartok is 28 years old, is currently in full-time employment and earns ?21,000 per year (gross). There are virtually no opportunities for overtime and the company does not pay end of year bonuses. Yasmin currently pays 3% of her gross salary into the company s occupational pension scheme (defined contribution) and her employer adds an additional 4%. Yasmin has the option of increasing her pension contribution to 10% and in which case her employer would increase its contribution to 12%. Through a local government backed shared equity scheme, Yasmin owns 40% of a one bedroom leasehold flat bought in 2009 for ?90,000. Yasmin s parents provided a substantial deposit to enable this to happen and the property developer continues to own 25%. The property is currently valued at ?100,000 In 2009 Yasmin took out a standard variable rate 25-year mortgage for ?36,000 (to cover her 40% holding) and the current APR is 4.5%. Yasmin owns and runs a car, she regularly uses this to travel to work and this is a 15-mile round trip. It is in Band F for DVLA road tax purposes, it is about 10 years old, is a four door saloon and currently worth about ?750. She currently pays ?450 per year insurance for third party fire and theft paying the first ?150. She also sets aside ?75 per month for maintenance, repairs and MOT. Yasmin has been driving for 6 years and has not made a claim to date. Yasmin has an overdraft facility arranged with her bank for ?500. She rarely uses this facility, but if she does so the cost is ?6 every month that she is overdrawn plus an APR rate of 18% for interest costs. Yasmin also has a credit card with a limit of ?2,000 and on which the APR is 24%. Yasmin pays all bills monthly by direct debit and those not mentioned above are: Item Cost per Month Comments Council Tax ?86.00 Unavoidable Leasehold Maintenance & Ground Rent ?88.00 Unavoidable Gas & Electricity ?75.00 Water & Sewerage ?21.10 Unavoidable TV License ?12.12 Contents Insurance ?20.00 Telephone, Mobile & Internet ?75.00 Sporting Activities & Gym Membership ?55.00 Savings (Premium Bonds) ?100.00 Required: Calculate Yasmin s monthly take home pay having taking into consideration income tax, national insurance contributions and current pension contributions (the latter being deducted at source). (3 marks) Due to previously announced government changes to income tax and the like, are there any changes to her take home pay in May 2016? (1 marks) Estimate Yasmin s monthly payments on her mortgage. (2 marks) Estimate Yasmin s monthly cost of running a car, stating any assumptions made as well as identifying sources of information. (4 marks) From the information provided, provide a monthly statement/budget relating to Yasmin s income and expenditure for February 2016. Estimate the amount left over for further discretionary spending and/or saving. State any assumptions made. (4 marks) As stated above, Yasmin is enrolled in a defined contribution pension scheme as opposed to a defined benefits scheme. Research and write a report documenting the demise of defined benefit pension schemes over the last 15 years or so. Additionally, compare and contrast the two different types including an identification of the risk and returns from both the perspective of the employee and employer. Your report should state any assumptions made. (20 marks)(450 650 words) Currently Yasmin is contributing 3% to her occupational pension scheme and yet also saving ?100 per month via premium bonds. Research and report on whether Yasmin would be better advised to pay more into her occupational pension scheme and/or to pay into a self-invested personal pension (SIPP) rather than invest in premium bonds. Your report should include tax considerations as well as likely returns and should state any assumptions made. (12 marks) (300 400 words) Yasmin is considering buying a new car as she relies on it to commute to work and it often breaks down. Yasmin is not interested in the make or colour but would like four seats as in addition to the daily commute she uses it over the weekends to transport team mates to netball matches. Research and report on the likely monthly cost of a purchasing a new car, with that report including deals offered by manufacturers as well as discussing road tax, maintenance, repairs and MOT costs. (10 marks) (250 350 words) Yasmin has not used comparison websites to date as she believes that sooner or later alternative providers will adjust their prices to reflect prices in a competitive market place. In this regard, Yasmin does not know what her gas and electricity usage is (but working 5 days a week and often sporting activities over the weekend), she assumes her telephone, mobile and internet usage are normal for her age group and she pays for contents insurance only (building insurance covered under Leasehold Maintenance & Ground Rent) with an estimated ?15,000 total replacement value and no individual item worth more than ?1,000. Research and report on whether Yasmin is correct in her assumption about comparison websites. Your report should include any potential savings you have identified from your research relating to energy costs, contents insurance, and telephone and internet charges and should state sources as well as any assumptions made. (15 marks) (350 500 words) In late January 2016 Yasmin s older brother announced that he was getting married with a ceremony arranged in Greece in May 2016, and wants Yasmin to be part of the wedding party. Yasmin wants/will attend but estimates the full cost to be ?1,100. She does not have any cash savings as such and is reluctant to reduce/redeem her premium bond savings to fund the trip. Given this to be the case, advise Yasmin on her other options to fund the trip including the use of overdraft facilities, credit cards and payday loans. Your report should include the likely costs of these facilities, their availability, as well as the timescale over which Yasmin is likely to be able to repay the debt. (9 marks) (200 300 words) Yasmin part bought a property in 2009 on the terms outlined above very soon after the global financial crisis. Since then there has been a change in government, a commitment to build more affordable homes as well as new initiatives to help people buy/part-buy their own homes. Research and report on (i) the impact of the global financial crisis on the housing sector in the UK and (ii) recent initiatives relating to house building, home purchase, mortgage lending, etc. as well as their likely impact to address the affordable housing crisis. (20 marks) (450 650 words) Total marks = 100 Assessment Criteria and Issues The submission date for this coursework assignment is in March Failure to submit by this date is likely to result in severe penalties unless you submit a relevant form. From the University s perspective, valid submission is electronic via Moodle so the deadline date is 10th April 201l6 as stated above. We will be meeting up on 11th April 2016 so in addition to Moodle submission I would appreciate a hard copy of your coursework assignment if possible. I expect your coursework assignment to be between 2,000 and 3,000 words and I have indicated above where I expect those words to be allocated. Quality not quantity is an overriding principle for me and so unfortunately I will deduct marks if your coursework exceeds 3,600 words. As stated many times in the above there is a requirement for you to research and collect actual data as well as analyse data. Sources of information must be included and referenced in your reports as well as the date the data was obtained. Points and/or arguments presented and made should be substantiated with data/evidence. I am interested in your own views but it should be clear through the referencing system whether they are personal or evidenced by the views/data of others A bibliography should be included using the Harvard system. This at least entails that every reference included in the bibliography is referenced in the main body of the text and that there are no references included in the bibliography that are not mentioned in the main body. Clarity of expression please pass through MS Word ?Spelling & Grammar or equivalent.