Married with two children and several grandchildren, John and Elizabeth wanted to spend more time with their family but weren’t sure whether then 62-year-old John could afford to retire early or whether he would need to continue working until he reached the State Pension age of 66.
They were relatively wealthy and had several pension contracts, a collection of old investment policies, unit trusts and shares they had accumulated over the years. John used to enjoy choosing investments but had not made any changes for a while and was worried that if something happened to him, Elizabeth would have a problem managing them.
Having read the Sunday papers, they realised that on their death they would have an inheritance tax problem but were not keen to make large outright gifts now as they were concerned about their own financial security and the impact this would have on John’s aim to retire early.
Elizabeth was still driving John’s old company car and wanted to purchase a smaller car. She was also concerned that John’s filing cabinet was full of papers that related to current and old investments, and that she’d asked John to tidy it up, but that he was worried he might throw away an important document they might need later.
We suggested that we hold a get organised meeting where John and Elizabeth brought in the contents of their filing cabinet. We organised and then scanned the paperwork so a copy of the documents could be stored electronically. And we then created a new working file of the policy documents, pensions and share certificates, including recent valuations. We produced letters of authority for John and Elizabeth to sign so we could obtain more information about the various polices and investments, and this allowed us to ask relevant questions around fund performance, charges relating to the contracts and whether there were any guaranteed annuities available for the pensions.
We asked John and Elizabeth to complete a Finametrica attitude to risk questionnaire that allowed us to better understand how much risk they would be comfortable taking with their investments. John had formed his own company and was used to taking risks so it was no surprise that he was more tolerant to risk than Elizabeth. However, as he was now approaching retirement he felt that a more cautious approach was required.
We provided them with an expenditure sheet so they could give us an indication of the income they would need on John’s retirement to support their desired lifestyle, and this included the cost of a new car for Elizabeth that John was happy with too. We produced a cashflow forecast to illustrate if John could reduce his hours or retire early, and whether the income that would be generated from their pensions and investments would be sufficient to meet their financial goals.
We analysed their investments using industry-leading software and concluded that they had done okay, however, there was no overall investment strategy and they were taking more risk than they realised. Some of the older contracts were also expensive and didn’t offer the new pension freedoms that would allow John to start drawing down some of his pension now.
This information allowed John and Elizabeth to make informed decisions about which investments they kept, as well as the peace of mind of knowing that all was noted and saved securely and safely.
The purpose of this case study is to provide technical and generic guidance and should not be interpreted as a personal recommendation or advice.