Helen received a divorce settlement which included a pension sharing order and a lump sum payment. Previously her husband had managed the finances for them both, and she was worried about how she would manage the money and make sure that it provided the income for the rest of her life that she needed. She also needed a new home for the pension and wasn’t sure exactly when or how she could draw down an income.
After meeting with Helen, we recommended our Wealth Management Service as it would provide her with all the answers she was looking for, and give her peace-of-mind going forward. We started by gathering details of all of her assets and liabilities and looking at her current income and expenditure. It was clear that in the early years there would be some additional expenses whilst she adapted to her new life. We used cashflow forecasting software to demonstrate her current income and expenditure position and what would happen if she continued to keep the capital on deposit. Helen was surprised to see that the effects of inflation and low deposit rates currently available meant that she would run out of money in her seventies – far too early.
We then ran various alternative scenarios to demonstrate the impact of our recommendations and how, by investing the capital over the longer term, she could maintain her current standard of living for the rest of her life whilst taking only an acceptable level of investment risk. We explained to Helen that she should have a contingency fund on deposit to help cover any shortfall of income over the next few years, and to help with any larger unexpected expenses. We put forward investment recommendations that included utilising her Individual Savings Account (ISA) allowance, and we also recommended a new pension provider which allowed her to take advantage of the new pension freedoms.
All of this was created on a single investment platform so that she could easily see how much her pension and investments were worth, and through our dedicated online client portal we provided 24/7 valuations. As the value of her assets was over £325,000 we also provided inheritance tax advice, and thanks to our cashflow forecast we were able to show Helen that she could make some gifts to help her son buy his first home and still have enough to support her lifestyle going forward.
Throughout the process we made sure that Helen was kept fully informed, not just of what we were doing, but exactly why we were recommending certain actions, and as a result she now feels much, much more confident in dealing with her finances. Helen appreciated the peace-of-mind of knowing that she had ongoing support and signed-up to our ongoing wealth management service. This ensures that her financial plan and investments will always be in-date and that we can continue to support her over the coming years.
The purpose of this case study is to provide technical and generic guidance and should not be interpreted as a personal recommendation or advice. Not all Inheritance Tax Planning solutions are regulated by the Financial Conduct Authority.