Individuals with high but irregular incomes are increasingly demanding financial services which can readily cope with changes in an earning pattern.

When your income can fluctuate substantially, the traditional approach to managing personal finances has been to hold sufficient cash on deposit for an emergency, have a long-term mortgage and have an agreed overdraft facility that can be called on when required.

When you receive a lump sum such as a bonus or a large dividend or an unexpected windfall, you have got the option of placing it on deposit where it is accessible and the interest is subject to tax, or alternatively you can reduce your mortgage and in turn your monthly outgoings.

The converse of this, however, is that if you unexpectedly need funds, it can be difficult, time-consuming and costly, as everyone knows, to arrange additional borrowing.

It is generally more efficient to reduce debt when you can. For example, to be financially beneficient to retain borrowings at 9 per cent, a higher rate tax payer would have to earn a gross return of at least 15 per cent from an equivalent deposit.

There are products on the market now where you can make large reductions to your mortgage when funds become available and re-draw the money in future, if the need arises.

If this sort of package is interesting to you, you must consult with your normal financial advisor.

Peter Meredith is a partner with Horwath Clark Whitehill.

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