Helen received a divorce settlement which included a pension sharing order and a lump sum payment. Previously her husband had managed the finances for both of them and as a result Helen was worried about how she would manage the money to ensure it provided the income she required for the rest of her life. She also needed a new home for the pension and was unsure of when and how she could draw down an income.
We recommended our Wealth Management Service, it was explained that this 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 she would run out of money in her seventies due the effects of inflation and the low deposit rates currently available. We then ran various scenarios to show 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 an acceptable level of investment risk.
We explained to Helen that she should have a contingency fund on deposit to help fund any shortfall of income over the next few years and to help with any larger expenses that she might not be expecting. We put forward investment recommendations that included utilising her Individual Savings Account (ISA) allowance. We also recommended a new pension provider that allowed her to take advantage of the new pension freedoms. We used one investment platform so that she could easily see how much her pension and investments were worth and through our client portal provided 24/7 valuations.
As the value of her assets was over £325,000 we also provided inheritance tax advice, the cashflow forecast indicated 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 continued to educate and inform Helen as to why we were recommending certain actions and as a result she now feels much more confident in dealing with her finances. Helen decided that she wanted ongoing support and agreed to sign up to our ongoing wealth management service. This meant her financial plan and investments were always in date and that we would 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.