Planning your financial Future, today

Client Background

Simon worked for an IT company and earned £60,000 p.a. which allowed them to comfortably live the lifestyle they wanted. They had recently had their first child, a daughter who was 6 months old. Lucy was in the process of starting her own consultancy business from which she expected to earn £25,000 a year.  

Simon had recently received a bonus of £50,000 from his employer and they wanted some advice on whether to invest the money or repay some of their mortgage. In terms of other assets, Simon had a pension from previous employment and was a member of his workplace pension scheme. Lucy had a small GPP from previous employment. They had cash savings of £20,000 in a joint account.  

They owned their own home valued at £250,000 which had an outstanding mortgage of £120,000. In terms of protection, they had a decreasing life and critical illness plan in place to cover their mortgage and Simon received sick pay from work for up to 4 weeks. 

Vision

As part of the visioning process, we worked with Lucy and Simon to put aside the concept of money and think about how they would like their financial future to look. They identified the following long and short-term goals. 

• To buy a new car and redecorate the kitchen in the next three years. 

• To repay their mortgage as soon as possible. 

• To pay for their daughter to attend private school from age 11. 

• To both retire by the age of 60. 

• To ensure that the remaining partner and their daughter would be protected should something happen to one of them. 

They were not yet sure exactly what their expenditure would look like in retirement but wanted to ensure they would have enough to enjoy holidays and meals out. 

Collaboration

We asked Lucy and Simon to complete risk tolerance questionnaires and discussed their attitude to risk and feelings towards money and debt. The results indicated that both Lucy and Simon were fairly cautious when it came to money. The concept of debt concerned them and although their mortgage payments were affordable, the outstanding debt was a worry. In view of this we agreed that it would be beneficial for them to use some of the bonus to reduce their mortgage, with a view to being mortgage free sooner. 

We prepared cashflow models based on their circumstances and objectives and explored potential options. Our analysis showed that although they were on track to retire at 60, if they kept up their pension contributions, they may not have access to funds to pay for private school for their daughter.  

After completing our analysis, we proposed the following solution: 

• Retain their existing cash savings as an emergency fund and keep a further £20,000 in cash to cover the cost of a new car and kitchen. 

• Use the remaining £30,000 from Simon’s bonus to reduce their mortgage when the current mortgage deal came to an end. 

• To help fund their daughter’s education we recommended regular contributions into Stocks & Shares ISAs invested in line with their risk profiles.  

• Simon’s pensions were low-cost and met his needs, however the investments were not in line with his risk profile. We therefore recommended rebalances into appropriate funds. 

• We recommended Lucy set up a new personal pension and begin making employer contributions from her limited company once the business was fully up and running. 

• As Lucy’s existing pension had high ongoing charges, we recommended transferring her existing pension benefits to the new plan. 

• We recommended additional life cover plans for both Simon and Lucy to ensure the remaining partner would be protected. 

• Income protection plans were also recommended to ensure they would continue to receive an income if they were unable to work due to ill health.  

Implementation

Once we had agreed on a course of action, we were able to handle all the paperwork on their behalf. We set up a new pension for Lucy and Stocks & Shares ISAs for each of them. We then arranged for Lucy’s existing pension to be transferred to the new plan and invested in line with her risk profile. We also liaised with Simon’s pension providers to ensure his plans were invested in the recommended funds. 

We worked with Simon and Lucy to complete the underwriting of the protection plans and arranged for the plans to be set up online. Once everything was set up, Lucy and Simon were provided with access to our online portal so they could see all their plans in one place. 

Lifetime Planning

Lucy and Simon decided to proceed with the Future Lifetime Planning Light service. This provided ongoing access to a financial planning team, access to the Future portal, annual catch ups with their dedicated planner and a full review with updated cashflow modelling every three years. 

Results

When Lucy and Simon approached Future, they were unsure what to do with Simon’s bonus and whether they were on track for their future plans. By understanding their future vision, as well as their personal feelings towards risk and debt, we were able to give them the answers they were looking for and put a plan in place to ensure their family was protected.   

Client Background

As part of the factfinding process we conducted a meeting with both Steven and Susan. We established that they had one daughter, aged 8. Steven was employed and had progressed through the company to management level, recently becoming a higher rate taxpayer. Susan worked part-time, earning around £10,000 each year. Their combined income was sufficient to cover their outgoings. They enjoyed a family holiday in Europe each year.

Steven had a pension from previous employment and was an active member of his current employers' scheme. Susan did not have any existing pension provision. Aside from Steven's inheritance of £65,000, they have a small emergency fund equivalent to two months of outgoings. They both stated they would like to retire once their daughter is independent so they can enjoy themselves whilst still relatively young.

Vision

As part of the visioning process, we worked with Steven and Susan to put aside the concept of money and think about how they would like their future to look. They identified the following key goals:

• To fund private school for their daughter from the age of 11
• To retire at the age of 58
• To travel in the first 10 years of retirement
• To enjoy meals out, holidays in the UK and regular games of golf throughout retirement

Collaboration

Once we had gathered information on their circumstances, objectives, and risk profiles, we started to build their financial plan. The initial cashflow models showed that it may be possible to achieve all their goals, with some effective financial planning.

Steven's parents had paid for him to attend private school when he was a child, and he enjoyed his experience greatly. As a result, it was very important to him to do the same for his daughter. It was agreed that putting aside enough of his inheritance for this purpose was a priority.

In addition, Steven's father was just 64 when he died and therefore retiring early and being able to spend some quality time together was also very important. Although they would like to go on big holidays in the early years, this was not quite as important an objective.

Once we understood their priorities, we were able to recommend the following action:

• Set aside £20,000 for the first 2 years of school fees and invest a further £40,000 in tax-efficient plans to offset any increase in fees due to inflation.
• Retaining enough in cash to cover the first 2 years ensures that any investments can be held for a minimum of 5 years, allowing time to withstand short-term fluctuations.
• We also recommended retaining the additional £5,000 from the inheritance in an easy access account to boost their emergency funds.
• It was clear that Steve could afford to increase his pension contributions by a further £200 per month. Steven would benefit from tax-relief, making the actual contributions £250 per month. He would also benefit from additional tax relief due to his higher rate taxpayer status.
• As the contributions took his adjusted net income below £50,000, they were able to continue receiving child benefit in full.
• As Susan did not have any pension provision, we recommended that she begin making regular pension contributions. Although she doesn't pay tax, she can still benefit from basic rate tax-relief on the contributions.
• The projections showed that their additional contributions over the next 14 years would enable them to retire at 58.

Implementation

Once we had agreed on a course of action, we were able to handle all the paperwork on their behalf. Steven's existing pension plans were low cost and offered sufficient investment options to meet his requirements. We helped set up new investment plans in line with their risk profiles, as well as a personal pension for Susan.

Lifetime Planning

Due to their long-term need for investment and pension planning we recommended that they sign up for the Future Lifetime Planning Service. This service provides an annual review meeting with their financial planner and cashflow projections will be updated each year to ensure they remain on track to meet their objectives. They will also benefit from a financial planning team to help them with any queries or concerns they may have.

Results

Steven and Susan were happy to have the reassurance that they could afford to send their daughter to private school. Although retirement was still some years away, having a plan in place to achieve this meant they could start thinking about where they would go and what they would do with their time together. The tax-relief they would receive through pension contributions and the fact that they could continue to receive child benefit was an added bonus.