Case studies

They were looking forward to retirement – The long commutes, the red tape and office politics were starting to wear them down. But they were concerned about this huge life transition:

• Do they have enough to retire?
• Can they afford to keep doing the things they love?

Robert & Catherine read about lifestyle financial planning and came to speak to our financial planner. Our financial planner helped them make sense of their finances and figure out what they wanted to do, when they wanted to do it and what sort of lifestyle they wanted to enjoy.

Our financial planner went on to crunch their “Number” – the amount of money they needed, taking everything into account, to live the life they wanted.

The result was that YES, they were already there – so long as they built into their financial planning a house downscale at around age 75.

This financial freedom allowed them to go to work knowing that they could leave at any point, if they wish.

And that’s what they did. 6 months after meeting our financial planner, they decided to retire and spend their time doing the things they love without any regret or financial pressures.

Paul & Sandra had previously been let down by a financial adviser. Paul therefore decided to make their own “financial plan” using a combination of odd bits of paper, a computer spreadsheet and his head.

Simply, they planned to repay their mortgage and accumulate as much as possible via his business until early retirement at Age 60. The plan was fool-proof, or so he thought.

A close friend suggested running their home-made plan by our 1st Chartered Financial Planner for a second opinion.

The 1st Chartered Financial Planner asked Paul & Sandra what they would like their lifestyle to look like. Together, they worked out how much it would cost. This included:

• Several holidays a year
• Weekly meals out
• Golf club memberships

After further discussions, they also mentioned other “one-off” costs they forgot to include into their own DIY plan:

• Both of their daughter’s weddings
• A special “once-in-a-lifetime” holiday on their Ruby wedding anniversary

The 1st Chartered Financial Planner went away to crunch their “number” – the amount of money they needed, taking everything into account, to live the life they wanted.

Unfortunately, their original home-made financial plan would have seen them running out of money in their early 70s, even without the once-in-a-lifetime holiday and paying for their daughter’s weddings.

However, with a little financial planning and some compromises, our 1st Chartered Financial Planner worked with Paul & Sandra to develop a plan that would allow them to continue their lifestyle into retirement without the fear of ever running out of money.

They wanted out and saw another house they liked in a nice area. The problem was, they were stuck in a property chain and were also struggling to sell their property for the price they originally paid.

One of their friends suggested that they speak to a 1st Chartered Financial Planner.

First, the 1st Chartered Financial Planner helped them to decide what sort of lifestyle they want in retirement. An active lifestyle was important to James & Anne, so we built in several holidays a year and an amount for “wild living”.

Our planner helped them make sense of their finances and crunched their “number” – that is the amount they need to live the lifestyle they want.

Our 1st Chartered Financial Planner informed them that they could purchase the new property straight away if they wanted. They could use some of their savings to buy the house now and replace the capital when they finally sell their retirement property.

The planner also told them that they would still be financially secure even if they received £40,000 less for the property when they finally sell it.

Lifestyle Financial Planning provided James & Anne with financial freedom. This was a huge relief for them both, knowing that their lifestyle was secure whatever happens.

They haven’t looked back since.

House wise John & Mary were ‘empty nesters’ and were about to downscale to smaller, more manageable property. Their three children had all moved on and their five bedroom house was now too big for them. They had found an apartment overlooking John’s Golf Club. Perfect. Their downscale in house would soon see £600,000 going from bricks and mortar into savings.

So John was encouraged to meet with a planner by a golfing pal.

First our planner spent some time getting to know John & Mary, and to understand the facts about what they had accumulated; their capital position, and their sources of income. Then she helped them to identify the cost of the lifestyle they wanted to continue to enjoy. She also got them to think about what else they might like to do in their lifetime in order to really enjoy their remaining years.

This is what she found. Based on the conservative assumptions they had made, after allowing for inflation, and after allowing for the potential costs of long term nursing care, John & Mary would NEVER run out of money.

In fact John & Mary’s wealth would continue to increase, even after allowing for extra expenditure.

But John & Mary had a big problem. A different kind of problem to most.

Instead of John & Mary running out of money, John and Mary were on course to die… with TOO MUCH!

Here’s why. After having paid tax throughout their whole life, on everything they’d ever earned (income tax and NI), on pretty well everything they’d ever spent (VAT), more tax when John sold his shares (CGT), and tax every time they had moved house (Stamp Duty) In fact John & Mary were about to pay another slug of tax (£24,000 to be precise) when they downscaled their house. Tax. Tax. Tax!

But their biggest tax bill was lurking.

Our planner helped John & Mary realise the size of the problem, and who was going to be the single, largest beneficiary of John & Mary’s hard earned estate. The Chancellor!

If both John & Mary died now the Inheritance Tax bill was well over £1million. And it was going to get worse.

But it didn’t have to be that way.

So our planner helped John & Mary work out just how much more they could afford to spend, and how much they could afford to pass on to their children NOW and over the next ten years without fear of them ever running out of money.

Our planner helped John & Mary create a ‘spending & gifting programme’

John & Mary are now on course to eliminate their Inheritance Tax liability, they are on course to manage their wealth to give them the life they want whilst gradually passing on wealth down to their children and grandchildren so the Chancellor does not benefit.

They can do this, because John & Mary now know – and more importantly understand – their Number.

After getting to know more about the clients our planner identified Mr & Mrs 10 Years Younger’s real requirements: to escape from their business and get on with their life. And their ambitions: Learn to fly ‘before it’s too late’.

On talking with our planner it soon became apparent that substantial funds had been accumulated in various investments including pensions etc. More important, our planner helped Mr & Mrs 10 Years Younger identify a desired lifestyle in order to calculate their ‘number’ – the amount of money they needed for the rest of their life. In the course of discussions our planner asked about the chances of selling their business. Mr & Mrs 10 Years Younger confirmed that an offer had been previously made which was turned down on the advice of their accountant, as the £2million offered was not near the £5 million of potential value that could be realised in the next 5-10 years.

So the business had continued to slowly kill Mr & Mrs ’10 Years Younger’.

Here’s what he found.

Mr & Mrs 10 Years Younger needed just £550,000 to retire NOW, not in 3 year’s time at aged 60. If the cost of flying lessons and the purchase of a light aircraft was built in they needed just £750,000 NOW. And this was to start living the life they wanted NOW.

Trouble is, they’d turned down £2 million!

With the help of our planner they managed to get the deal back on the table and ended up selling their business for £1.8 million.
Mr & Mrs 10 Years Younger continue to enjoy their retirement and now look – AND FEEL – 10 years younger.

Sarah has always been conscious of her expenditure and knows, from one month to the next, how much she will spend to maintain her existing lifestyle. Given that her State Pension is her only source of income, Sarah had also arranged to draw money from her Personal Pension and her investments to cover her income deficit.

Having met with a Financial Planner at 1st Chartered to review her affairs and undergo a comprehensive cashflow forecasting exercise, Sarah was burdened with the news that she would run out of money by the time she was aged 80. Sarah’s family had a history of long life and she had always been planning for much further in the future than this and so this news was devastating. She was very happy with her current lifestyle; she did not want to reduce the amount that she spends on holidays, socialises with friends or takes the family away on mini-breaks, but Sarah was being faced with the possibility that she might have to make sacrifices to ensure that she remains financially secure for the rest of her life.

Sarah’s Financial Planner re-structured the way in which she drew money from her pension and investments to minimise all tax liabilities. This meant that Sarah did not have to encash quite as much from her investments to receive the amount she required after tax, so her investments and pension would last longer.

Furthermore, Sarah’s Financial Planner proposed that she re-arrange her Will to take full advantage of Inheritance Tax allowances and minimise, if not eradicate, any potential liability on her death. As a result of this, Sarah’s Financial Planner pointed out that the Life Cover policy was no longer necessary as the liability which it was arranged to cover had disappeared completely as a result of the advice.

The knock-on effect of this was that Sarah no longer had to pay the premiums for this Life Cover policy, which reduced her income requirement from her investments and thus increased their longevity.

The combined effect of the strategies set out by the Financial Planner was that Sarah would no longer run out of money; even if she lived to be 100! In addition, her expected Inheritance Tax liability, which would have been an administrative burden on her family, had been removed entirely!

Sarah has since been able to continue with the lifestyle she had become accustomed to and spend time with her friends and family without any need to worry about her finances for the rest of her life. 1st Chartered had provided her with peace of mind and happiness which, as Sarah has said herself, is a far better gift than anything she could have expected from Financial Planning and advice.

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