Scott Pow and his partner, Fiona, have tackled the traditional milestones of life in an unusual order.

The couple, both 29 and working in local government, first bought a house together in Stevenage, Hertfordshire. Then they had a baby boy and finally they plan to get married in a couple of years’ time. Their future financial calculations are very much based around their home, their baby and their forthcoming wedding.

Their property, a two-bedroom semi-detached house on a new estate, was purchased in 2006, near the peak of the property boom. Scott says: “The house cost £177,500 and we bought with a 5 per cent deposit, so we had a mortgage of £168,000. It is now valued at about £170,000. We are not in negative equity but are pretty close to it.

“We are concerned about what will happen when our existing 4.99 per cent five-year fixed-rate mortgage with Nationwide Building Society comes to an end in 2011. Will we be able to obtain an attractive deal or will our potential lack of equity mean that we are forced to pay over the odds?”

A further consideration is that, with Fiona now working part-time, the couple have a reduced joint income of a little more than £50,000 (£34,000, plus £19,000). They also want suggestions on how they could trade up to a larger property as their family grows.

Scott and Fiona are keen to ensure that their 14-month-old son, Elliott, has a solid financial start when he reaches adulthood. Scott says: “We have invested the £250 we received for his Child Trust Fund in a stock market-linked investment with Legal & General. We are adding £10 a month, which also goes into the L&G tracker fund.”

Alongside this Scott and Fiona are building up a rainy-day fund for general emergencies and any special things that Elliott might need. They would like guidance on how much to hold in such an account and what is the best one for their situation. At present they have more than £1,000 in an ING instant-access account, which is earning 0.5 per cent interest, plus £600 in a Virgin account paying 0.1 per cent.

They have also made a start on building some long-term savings. Scott has £2,750 in an Isa invested in the Virgin Tracker Fund — “now worth much less than I put in” — plus £250 in a Virgin cash Isa and £1,000 in Premium Bonds. Fiona has a stocks-and-shares Isa with Santander (the Abbey UK Growth Fund), which has fallen in value to £3,500, and a cash Isa worth £1,500 with the same group. The couple also jointly hold £500 in a Nationwide five-year bond paying 3.3 per cent. They hope to add to their nest egg from the £100 that they reckon they can save each month.

One area that is not causing too many headaches at the moment is pensions. As local government employees, both Scott and Fiona are enrolled in a final-salary scheme. For every year’s contributions, which cost them about 6 per cent of salary, each accrues a pension worth one sixtieth of their eventual final salary. Scott has notched up six years of contributions and Fiona eight, so they are on target to retire on a pension of about two thirds of their final salary at the age of 65. However, Scott wants to know how much the pensions are likely to be worth in real terms at retirement and what danger there is of local authorities switching to less generous money purchase pension schemes.

Finally, there is the wedding. The couple are planning to tie the knot in Las Vegas and Scott says: “We expect it will cost us a fair bit and reckon to spend between £6,000 and £8,000.”

Fortunately, the couple have been saving for their big day. At the start of the decade each took out a £25-a-month ten-year policy with LV, the friendly society. The policies are due to pay out between £2,500 and £3,000 when they mature in 2010 and 2011.

What the expert’s say

Savings and investments: Geoff Penrice, Honister Partners

“Ideally, Scott and Fiona should have about three to six months of salary as a reserve, which means between £10,000 and £20,000. The first thing to consider are their cash deposits. All rates are low at the moment, but some are lower than others. They are receiving 0.5 per cent and 0.1 per cent from ING and Virgin. It may be worth considering the Alliance & Leicester Online Saver Issue 5, which has instant access and is paying 3.15 per cent.

“Looking at their cash Isas, Virgin is paying 0.1 per cent, which is derisory, even in the current climate. Abbey is paying 2 per cent on its cash Isas, which is pretty good at the moment. However, Intelligent Finance is offering 2.75 per cent and accepts transfers. Scott should certainly consider transferring his Isa cash funds to Intelligent Finance.

“The average return on Premium Bonds is very low at present; about 1 per cent. However, there is a chance of a big win up to £1 million, so I think it is still worth holding them — just don’t rely on Ernie.

“Scott and Fiona are making use of the £250 to start a CTF and are adding £10 a month. I agree that, given the length of time before Elliott is 18, they are right to invest in a share-based fund. For longer-term investments, Scott and Fiona have the Virgin Tracker and Abbey Growth Fund Isas. Scott may be better off with a good-performing active fund, such as Invesco Perpetual Income, which has consistently outperformed the index over the past ten years. As they are drawn to Vegas they may want to take a punt and invest some money in a higher-risk fund, such as JPM Natural Resources. It’s still less risky than Blackjack.”

Action plan

Build a rainy day fund of at least £10,000.

Switch to better-paying deposit accounts and cash Isas.

Consider switching to some better-performing funds.

Pensions: Danny Cox, Hargreaves Lansdown

“Scott and Fiona are members of the ‘Rolls-Royce’ of pension schemes, the local government pension scheme. This is a final-salary scheme in which the benefits are based on the number of years service and final pensionable pay at retirement.

“From April 1 last year the scheme has been building at one sixtieth of final pay for every year’s service, rather than one eigthieth, as previously. Tax-free cash at retirement is also available, by reducing the amount of pension.

“The retirement age for the scheme is 65. If Scott or Fiona retire before this, their pensions will be reduced by a certain amount and the state pension age is scheduled to move to 68 by the time they retire. Scott’s pension at 65, after 42 years service, would be about £23,000 a year, plus £6,375 tax-free cash in today’s terms. This assumes that his pay does no more than rise in line with inflation.

“To put this into context, Scott is paying 6.5 per cent into the scheme and were he to pay only this, with no employer contribution, into a private pension over the same period of 42 years, his pension at 65 would be about £8,400 a year in today’s terms, assuming a 6 per cent growth rate after charges. It is therefore easy to see that the local authority scheme provides excellent benefits.

“Assuming that Fiona will work part-time for ten years before reverting to full-time work, her pension at 65 would be about £20,000, plus tax-free cash of £8,400.

“The couple are worried about possible future alterations to their pension schemes, but a change to the benefits they have already built up is highly unlikely. Changes to benefits built up in the future could happen, but these would be subject to consultation and negotiation.”

Action plan

Stay with the local authority schemes.

Mortgages: David Hollingworth, L&C Mortgages

“Currently, the level of equity in a property will make a huge difference to the rates on offer, with many of the best rates reserved for those with at least 25 per cent. Overpaying the mortgage or building a fund to reduce the capital balance makes a lot of sense. Although their Nationwide deal carries early repayment charges within the fixed-rate period, they do have the flexibility to overpay by as much as £500 a month.

“If nothing has improved in the market and their loan-to-value (LTV) ratio remains high, they will find few, if any, options from other lenders. However, Nationwide is offering existing borrowers attractive deals up to 95 per cent LTV. And if they do not switch to a new deal, they will revert to one of the lowest variable rates at only 2.5 per cent.

“In trading up to a larger property the deposit will again be key. With equity in the current property having been eroded, a plan to overpay and save will help when they move.”

Action plan

Start mortgage overpayments.

Build deposit on a bigger property.

Scott’s response

“The area that has been causing us the most concern is our mortgage. We are grateful for Mr Hollingworth’s advice on our situation and it has clarified what we can expect when our current deal expires in 2011. Going forward, we will endeavour to direct as much of our disposable income as possible into overpaying the mortgage.

“As for savings, it is clear that I need to move to more competitive accounts. Mr Penrice’s advice has brought home the need to do this, and over the next few weeks I will compare alternative cash Isas with a view to transferring. I will also make arrangements to exit the Virgin Tracker for a better-performing fund.

“We were really pleased to receive Mr Cox’s thoughts on our pension arrangements. Knowing that we are both paying into such a good pension pot is really pleasing. It is also great to know that it should provide us with a comfortable standing of living in our retirement. Hopefully, by that time our mortgage will be a distant memory.”

Would you like a financial makeover? Write to Money, The Times, Times House, 1 Pennington Street, London E98 1TB, marking your envelope Money MoT, or e-mail moneymot@thetimes.co.uk. Please include current finances, short and long-term goals and a daytime telephone number. You must be prepared to disclose your income and be photographed.