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We’re going to be doing a new column in the Lemon Pickleball newsletter called A Financial Pickle, and it’s a chance to run through some scenarios to show how financial planning can solve problems and lead to a more confident future.
Nadia Khan, Wren Sterling’s Lemon Pickleball Financial Planner explains:
“In a recent case, I was working with a client called Tom in his early 50s, who was successful in his career, married with one daughter, currently at university. He came to Wren Sterling because he was time-poor and recognised that to pull his finances together and work out where it left him, plus figure out what his future expenses could be, was a bit too much. He had seen a presentation at work and that prompted him to get in touch.”
The Pickle:
- 15 years away from state retirement age
- 5 different workplace pensions from a variety of previous roles, plus a current pension plan
- £400,000 remaining on a mortgage over 15 years
- £150,000 in investments
- £60,000 in savings
- Wife is a civil servant with an anticipated £40,000 a year pension, which would start paying out in 10 years’ time
“This is a really common scenario as very often people are doing the right things for their retirement, they just haven’t stopped to check. My approach was:
- Get an up-to-date valuation on pension plans, which totalled £550,000 with total annual contributions of £11,000
- Compile a complete list of expenses and projected expenses, which came to around £110,000 for the family now, but would reduce to around £80,000 once their mortgage was paid off, and allowing for inflation over the coming 15 years
- Find out what Tom and his family want to do in the coming years, and how much that might cost. For example, a house deposit for their daughter, family holidays, new cars. This is undoubtedly the best part of my job – helping people use their resources to have fun and feel confident spending money, knowing their long-term plans are in place.
- Discuss how finances should be structured for estate planning purposes and create a Trust.
The Outcome
“In the end, we calculated that because Tom had a substantial pot and his current contributions were at the right level, assuming his financial situation doesn’t change too much, he can afford to retire two years earlier, at the same time as his wife, and the tax free lump sum from his pension could repay the mortgage debt earlier and form the basis of a house deposit contribution for his daughter.
“We’ve moved his investments to a more adventurous fund, in line with his risk appetite, which should bring through the growth he needs, while we also took the opportunity to reduce investment costs.
“We reviewed the family’s insurance policies and found that his life insurance policy was about to lapse, so we set up a new policy to last until Tom’s retirement date, to ensure his wife and daughter don’t have any financial worries.
“Finally, we’ve established a family trust, which will ensure Tom’s daughter has access to funds for many years to come but removing the risk that she overspends.
“I will have yearly check-ins with Tom in the lead up to retirement so we can recalibrate any plans that need changing, but for now, he can continue to enjoy his career and family life. The whole process took about two months to complete, from initial conversation to plans being put live.”
Got a pickle that looks like this one?
Try Wren Sterling’s Pension Calculator here or contact Nadia Khan, Lemon Pickleball’s Financial Planner Nadia.khan@wrensterling.com or www.wrensterling.com/lemon
Prefer face-to-face? Nadia will be at Lemon Pickleball’s tournament on Sunday 16th November, so feel free to speak to her then and book an appointment for any time afterwards.
IMPORTANT:
This is for information only and does not constitute advice. A pension is a long-term investment, usually inaccessible until age 55 (57 from April 2028 unless protected). Investment values and income can fall as well as rise, affecting your pension benefits. . The Financial Conduct Authority does not regulate trusts.
