Greater freedom

You may need help to think through?

• keeping the plan fit for purpose applying any flexibility you need around your income needs
• incorporating your state pension
• drawing income from your pension pot tax efficiently
• ensuring your money doesn’t run out throughout retirement
• planning for any future expenditure
• thinking about when to delegate financial control
• planning funeral expenses
• making plans to pass on wealth tax efficiently

Greater freedom – Case Study

Background

Cathy retired three years ago and was previously employed as a marketing manager earning a decent income. Today her income mainly comes from her defined benefit employer’s pension which pays her around £19,200 per year in addition to her state pension. When we met her sadly she had been recently widowed and now that she was on her own she really wanted to “make the most of her retirement” and do some of the things she had always wanted to do. She now has c. £250,000 as a lump sum from her late husband’s various Life Assurance plans which she wants to put toward her retirement provision. Cathy has no mortgage or dependants.

Key Client Considerations

Cathy’s recent loss has made her more aware of her own mortality and she wanted to make the most of her current finances. She wanted to know what her options were and whether the new pensions changes affected her in anyway. She wanted to spend more on travel and visit some of her relatives who lived in Australia and New Zealand. As she was now on her own she had some concerns around her own care needs in later life.

Approach

To begin with we spent some considerable time in order to really get to know Cathy and understand what she really wanted out of the rest of her life. Following on from this we then took the time to outline some of the recent changes under “Freedom and Choice in Pensions” and how they affected her own retirement. We used a retirement modeller to demonstrate how her £250,000 could be invested to supplement her retirement income and provide flexibility to draw varying degrees of money to fund her trips as well as contributing to future care costs if required.

We also provided further reassurance that if required she could access money from her house to further support any care costs she needed.

Outcomes

Cathy now has a comprehensive financial plan, incorporating a lifetime financial planning forecast, which has given her the confidence to travel and visit her relatives who emigrated a number of years ago. She has complete peace of mind knowing that she will always have enough money. Cathy meets with us every year to review her progress and to adjust her plan where necessary to ensure she remains on track to achieve what she wants in her retirement.

Slowdown

You may need help to think through?

• reviewing your income and ensuring it still won’t run out

• drawing your income tax efficiently from your remaining pension pot
• finalising any estate planning to ensure it is tax efficient
• making allowance for potential care costs
• planning for later life by thinking about who you might delegate financial decision making too on your behalf

Slowdown – Case study

Background

Having been retired for over 9 years George and Elizabeth felt that they wanted to review their finances with a view to simplifying matters. They felt the amount of paperwork they had to deal with every year was an unnecessary burden. They had built up significant funds over the years with a number of different companies. Their financial adviser had retired recently and they were now looking for a new adviser to review their plans. They wanted someone to help them bring clarity and simplicity to their current financial position and for the future. They were also starting to “take things steady” due to a health scare that George had recently experienced.

Key Client Considerations

George’s recent health scare made them both want to ensure all their affairs were in order. They had not had their will reviewed for quite some time and had not organised an appropriate Power of Attorney. They felt overwhelmed by the amount of paperwork they received from the various investments they held and felt if anything happened to them it might be quite difficult for their children to work out what was what.

Approach

We arranged an initial meeting where we got to understand George and Elizabeth’s financial situation, their lifestyle and their future plans. We also took the time to explain the changes under “Freedom and Choice in Pensions” and the potential implications for them in later life. We reviewed George and Elizabeth’s financial and life style goals and produced a future cash flow analysis to help simplify their finances.

This incorporated understanding their attitude to risk as well as their capacity for loss and the results helped us to balance out the level of risk with the expected investment returns when designing their investment portfolio. We were also able to considerably simplify their investments by aggregating some of them into a single investment platform and some into another provider offering appropriate solutions. We also simplified the number of tax wrappers used. We achieved this over a few years to ensure we maximised the tax allowances available to both George and Elizabeth. We also arranged for them to visit their solicitor to review their will and put in place a lasting Power of Attorney. Their cash flow also included provision for future care costs.

Outcomes

George and Elizabeth now have a much more streamlined financial plan in place which involves far less work and a much reduced “paperwork burden” which they are delighted with. Since we started working with them their finances are much more straightforward and there have also been significant savings in annual charges and transaction costs which have been a welcome bonus for George and Elizabeth. They now have peace of mind that their finances are in good order and can continue enjoying their retirement doing the things they had planned. As well as having all the paperwork in place to enable their children make both financial and health related decisions for them.

Later life

You may need help to think through?

• ensuring any increased income needs can be met from your savings
• finalising and implementing any planning choices around care
• seeing the positive impact of legacy and estate planning by passing wealth on to your family if appropriate
• potentially releasing further income from your home to fund care costs.

Later life – Case study

Background

Michael and his wife Anna stopped working many years ago and have in the main enjoyed a fairly relaxed and trouble free retirement. Unfortunately in recent times both of them have started to experience some reasonably significant health issues and they are now much more dependent upon others than they used to be. Given this deterioration in health and the recent legislative changes related to pensions, which they have read about, they have a number of different conflicting priorities and concerns. They are uncertain about how best to now provide for themselves in later life whilst at the same time they wanted to create a plan that allowed them
to help their grandchildren with university fees, getting established in their careers and their first homes. They also wanted to help their own children by way of loans if required. They were also looking to simplify how they managed their money.

Key Client Considerations

Michael and Anna were worried that they may run out of money if they both ended up in a care home and that this may have a detrimental effect on what they could do to support their family.

Approach

The process took a few months to build a complete understanding of Michael and Anna’s requirements. It was important to provide Michael and Anna with information enabling them to make informed decisions about their own financial future and their legacy as well as showing them the impact certain decisions would have on their future cash flow, tax status and crucially long term care provision. As part of this we took the time to outline some of the recent changes under “Freedom and Choice in Pensions” and how these might impact upon their own finances.

We then worked with a number of different professionals during this time to ensure the plan was fully aligned to their wishes and delivered what they wanted. Using our cash flow planner we were able to demonstrate the impact care costs might have on their plans as well as showing how utilising some of the new lifetime mortgage products might help them ensure they can live comfortably in retirement.

Outcomes

We were able to meet all of their objectives, significantly reducing their income tax liabilities in the process and they were delighted with the results. We ensured an immediate and ongoing reduction in inheritance tax as well as putting in place a robust long term care plan for both Michael and Anna. We were also able to cap the IHT liability on a further substantial portion of their wealth. Our advice enabled Michael and Anna to have peace of mind that they would be cared for as appropriate, their money was being well looked after and that they had provided the legacy they wanted to for their family.