Case study:

Anna & David

Anna and David visited 1825 for a review of their current financial arrangements. Anna is 56 years old and David is 57. They are married, and have three grown up children with families of their own. Anna is a retired head teacher with a pension income of £30,000 a year. David is a solicitor earning around £145,000 a year, and is therefore a higher rate taxpayer. David hopes to retire early, although hasn't decided exactly when. They are keen to prepare for David's retirement and want to understand more about pension freedoms. They currently have £500,000 in David's personal pension and £90,000 across a number of ISAs invested with different providers. They also have sufficient cash on deposit to meet their short term needs.

The 1825 financial planning process

The 1825 Financial Planner began by gaining a thorough understanding of their current financial situation, including a detailed discussion about their future plans and aspirations. This helped both Anna and David to consider what was most important to them, in order to clarify and agree their financial goals and objectives. The financial planner helped them to prioritise their key goals, which were:

  • Having confidence about their income needs throughout their retirement, and maximising the tax efficiency of their retirement savings
  • Providing support to help with their grandchildren’s educational costs in the medium term
  • Passing on their wealth to the people and causes they care about, in a timely and tax efficient manner, in the long term

After establishing these goals, the financial planner worked with Anna and David to assess their future income requirements. This included considering how these may change in future, based on the key goals they’d already identified.

Following the meeting, using the details provided by Anna and David, the financial planner used portfolio analysis tools to measure the risk and potential returns for each of their existing pensions and investments, to compare to the investment strategies agreed.

The financial planner then built a comprehensive financial plan to meet each goal with an appropriate investment structure and associated tax planning.

What the plan included

  • Details of their specific objectives, with appropriate timescales and target capital/income
  • Recommendations to structure contributions and distribution of wealth to utilise annual exemptions (including additional opportunities arising from the most recent budget announcement)
  • A potential tax saving of £36,000 in the first two years of the plan through utilising tax reliefs and reinstating David’s income tax personal allowance
  • Arrangements to allow David and Anna to pass wealth on to the people and causes they care about in the future, in a tax efficient manner

The investment structure recommended involved separate investment portfolios, matched to their different goals. Each portfolio has exposure to a wide range of asset classes, aiming to maximise growth while being managed to the appropriate level of risk. The portfolio linked to David’s retirement needs takes into account his need for greater security in the shortterm before he begins to take an income.

Initial advice costs

Our initial fee takes into account the complexity of advice given and the value of assets under advice. 1825 provided initial advice on Anna and David’s complete financial plan, including retirement planning, investments and estate planning. The fee for this initial advice was £6,450 (1.09% of assets). If you use our Private Client Service specialists for your tax or inheritance planning their services may be charged for separately.

For more information about our charging structure, please read our Terms of Business (PDF, 478KB).

Ongoing advice requirements and costs

The 1825 Financial Planner has agreed with Anna and David that regular reviews of their financial plan are essential for a smooth transition into retirement. As that time approaches for David, their finances can be restructured to design a tax-efficient income strategy, with the aim to make his savings last as long as he needs them to. They have agreed that an annual review will be sufficient over the coming few years, until David retires, and then they may well increase the level of service. This will allow them to regularly review actual spend in retirement and performance of their invested assets. They might also want to consider their options around transferring wealth to the next generation.

The 1825 Annual Management Service would offer the appropriate initial level of support for their needs. This service includes:

  • Ongoing access to their dedicated financial planner
  • Reviewing goals and objectives
  • Considering changes to personal circumstances and reviewing attitude to risk
  • Reviewing portfolio performance
  • Making use of annual exemptions and reviewing the tax efficiency of solutions
  • Rebalancing any investments held outside 1825 investment solutions
  • Regular communications to keep them updated about market and regulatory changes
  • Access to specialist tax, trust and will-writing services - an additional charge would apply for this

The ongoing advice charge payable for this service will be based on the valuation of their assets under advice. On the valuation date the applicable charge would be established for the upcoming year. Based on Anna and David’s current asset valuation of £590,000 the charge would be 0.69% per annum. Based on their current valuation the indicative charge for the year would be £4,071. The actual amount collected each month will vary, because it depends on the value of their investments on each charge collection date. Additional fund or plan charges would apply for Anna and David’s products and investments.

Being in this service ensures David and Anna have access to a dedicated financial planner who can help them make the right decision at the right time, staying on top of the ever changing financial, regulatory and tax rules.

For more information about our charging structure, visit our service options and charges page.

Case study update

Case study update - Anna and David three years on

At their annual review each year, Anna and David have updated their 1825 Financial Planner on David’s thoughts about when he’d like to retire.

It's three years on, and the time has now come, so they discuss how this affects their financial plan. They're not sure about their immediate and short-term income needs, and feel that they might need to see their financial planner more regularly until they are settled into retirement.

Management of their investment portfolio, withdrawal of retirement income, tax-efficient gifts to their family - making the most of inheritance exemptions - and funding for their grandchildren's school fees will all need regular consideration.

The financial planner recommends that Anna and David move to 1825’s Tailored Management Service for the next two to three years, as this will provide the regular focus they need. The additional benefits of this service include:

  • Increased frequency of planning reviews (six monthly)
  • A six monthly consolidated view of all investments
  • Active collaboration with their professional contacts - solicitor and accountant
  • Invites to relevant financial planning and retirement seminars
  • Ongoing access to specialist tax and trust services - an additional charge may apply for this

The ongoing advice charge payable for this service will be based on the valuation of their assets under advice. On the valuation date the applicable charge would be established for the upcoming year. Anna and David’s asset valuation has increased to £740,000, and the charge would be 1.04% per annum. Based on their current valuation the indicative charge for the year would be £7696, however again the actual amount collected will vary in line with changes in the value of their investments throughout the year. Additional fund or plan charges would apply for Anna and David’s products and investments.

Your 1825 Financial Planner will recommend an approach that is tailored to your circumstances.

 

References to legislation and tax are based upon our understanding of UK law and HM Revenue & Customs practice in the UK as at August 2015. Laws and tax rules may change in the future. Personal circumstances also have an impact on tax treatment.

With any investment, the value can go down as well as up, and could be worth less than originally invested.

If you are interested in seeing what 1825 can do for you, contact us.