Mr & Mrs Johnson were referred to us by a local solicitor following them expressing a need to get their retirement plans in order. We arranged a no obligation initial consultation and conducted a full financial review.
Although the following case study relates to an actual example, where we have helped our clients by providing solutions to their financial problems, the names and figures have been changed for confidentiality purposes.
Mr Johnson is aged 57 and Mrs Johnson 56. Mr Johnson worked full time as a Sales Director and received a salary, bonus and car allowance. In addition to this he also received employee benefits such as death-in-service, a company pension and private medical insurance.
Mrs Johnson was retired and stated that she was highly unlikely to return to any form of employment.
Mr and Mrs Johnson highlighted that their top priority was to review their current financial situation with the objective of ensuring that they can maintain their current standard of living in retirement.
In addition to the above, Mrs Johnson had also came into an inheritance and wanted to consider her options due to bank deposits and savings accounts offering her little in the way capital growth, but more importantly protection against the effects of inflation over time over the long term.
Mr & Mrs Johnson have always been regular savers and had already accumulated a good degree of wealth via their savings, investments and pensions.
Following a comprehensive financial review of their current situation and circumstances, we established that they had three key goals:
1) They both wanted to review their current pension and investment arrangements
2) Mr Johnson expressed that he wanted to retire in the next 3 years at 60, however wasn’t sure if he could afford to retire at that age, or earlier if possible.
3) Mrs Johnson wanted to discuss investment options for her inheritance.
My role, as their Chartered Wealth Manager was to bring all the pieces of the puzzle together and construct a solid, robust and suitable retirement plan for their future. This was with the fundamental aim of giving them not only and holistic view of their financial affairs, but also a realistic scenario of what is achievable.
After getting a full understanding of their current circumstances, needs, and future goals, we performed an analysis on each of their pensions to establish if they were suitable, could be working harder for them, and could be easier to manage.
Part of this process was to also conduct a cash flow modelling exercise using fund projections and assumptions based on the client’s circumstances at the time.
Following the analysis, my recommendation was to transfer Mr Johnson’s pensions with the simple goal of getting his retirement provisions working harder for him. His current pensions had not been reviewed for a number of years and therefore had either performed badly or were completely unsuitable when considering the clients current circumstances, risk and capacity for loss.
Mr Johnson also wanted to seriously consider if early retirement was feasible. We updated our cash flow model accordingly and discovered that it was in fact possible that he could stop working and retire today. Something which came as a bit of a surprise to him! With his pensions now in order, his current income requirements assessed and his ability to access capital, Mr Johnson could rest assured that his retirement was secure and could now make an informed decision.
With the funds available from Mrs Johnson’s inheritance, I recommended we utilise both hers and her husband’s investment ISA allowances for the current tax year and invest the remaining amount in a general investment account under a conservative portfolio strategy. This was with the primary goal of preserving the capital by achieving growth in excess of inflation, whilst making the most of both their tax allowances.
Six months on and our next review was scheduled. At our meeting Mr Johnson mentioned that he had now left full-time employment safe in the knowledge that his and his wife’s financial future was secure. He had decided to semi-retire, set up his own limited company and take on a part-time role as a consultant using previous connections he had built up during his career.
Mr Johnson takes comfort in the fact that he has remained in work out of choice, and feels reassured that he doesn’t have to work, but now chooses to do so in the short term out of choice and his desire to continue, all be it on his own terms.
Mr and Mrs Johnson are now comfortable and feel confident that they have enough income to support themselves in their golden years. This is with the additional security of knowing that they also have the option to access their investments should they ever need further capital or income.
As with all our clients I continue to review their circumstances and investment strategy bi-annually to ensure the on-going suitability of their financial plan.,
If you have been wanting to review your retirement arrangements, we would be happy to help. You can call us on 01858 791182 or get in touch here.
The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.
The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.
The advice provided to Mr and Mrs Johnson was given after a full evaluation of their specific needs, circumstances and requirements. The solutions provided would not be suitable for most investors and the information provided does not constitute advice.
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