Stephen received an inheritance of £350,000 in November 2012 and hoped this would give him a chance to reorganise his finances to ensure his family’s current and future lifestyle could be secured and, in particular, the future needs of his daughter.

Referred to us by an existing client, Stephen and his wife, Caroline, are both in their early 50s.

They have a daughter Aimee (10) who has significant learning difficulties. At an initial meeting with Gould Financial Planning managing director Andrew Gait, the family’s future ambitions and objectives were placed in order of priority:

• To ensure Aimee’s educational needs are met and to provide for any necessary financial assistance throughout her adult life.
• For Stephen to reduce his workload from age 65 and be financially able to retire from age 70.
• For Caroline to rebuild her pilates business back up to a position it had been four years ago.

Stephen was then able to put some figures on the above objectives:

• Private school for Aimee would cost around £15,000 per annum to age 18.
• In full retirement, joint income would need to be around £30,000 per annum rising with inflation, with £20,000 continuing to the surviving spouse on first death.
• In partial retirement Stephen wanted to secure £15,000 per annum from pensions and investments.
• It was anticipated once Aimee was at private school, Caroline would have more time to devote to her business and an income in the region of £15,000 per annum after tax was achievable.

Stephen’s consultancy business was generating an income after tax of around £37,000, and Caroline’s business was generating approximately £1,500 per annum. She was also receiving state benefits for Aimee of around £2,500 per annum. Their joint annual income, therefore, was in the region of £41,000 – but heavily reliant on the success of Stephen’s business.

Annual family expenditure was around £36,000, but increasing to approximately £50,000 a year from September 2013 when Aimee was due to start private school. So, although there was a current surplus of about £5,000 this was likely to change to a deficit of £9,000 per annum.

The couple’s assets total approximately £850,000 made up of their property valued at £400,000, cash deposits of £350,000 (Stephen’s inheritance), pensions and investments of £100,000. The house had a mortgage of £100,000 at an interest rate of 2.5% above Bank of England Base Rate.

Following contact with the Department of Work and Pensions and previous employers, up-to-date estimates of both state pensions and deferred final salary pensions were obtained. Projections were then provided of retirement income at age 65 and 70 on the basis of both increased expenditure and no change in expenditure (i.e. Caroline’s business generated £15,000 per annum).

Gould Financial Planning’s Andy Gait, who specialises in Retirement Planning, said: “We talked to Stephen and Caroline at length about investment risk and the need for a robust future savings strategy to be put in place.

“It was decided that until Caroline’s business was better established it would make sense to follow a policy of low investment risk. Stephen accepted that less investment risk meant a greater probability that his partial retirement would be deferred beyond the age of 65.

“We agreed on a strategy for their retirement income to be met from their pensions and investment portfolio, meaning that on their death both their house and approximately £200,000 of savings would be available to Aimee to secure her financial well-being.”

Stephen and Caroline followed our advice and:

• Rewrote their wills, giving thought to the appointment of appropriate trustees to take care of finances for Aimee’s future well-being in the event of their death.
• Ensured the family’s lifestyle was secured at £50,000 per annum until Stephen’s 65th birthday (when Aimee would be 23), or in the event of Stephen’s ill health or death.
• Ensured that in the event of Caroline’s ill health or death the family would receive an income of £15,000 per annum until Stephen’s 65th birthday.
• As the mortgage had no penalty for early repayment and was costing 3% per annum from taxed income Stephen cleared the mortgage of £100,000.
• A portfolio of tax efficient investments including cash deposits was placed for £230,000; pension contributions of £20,000 were made.

At their first review in January 2014 Stephen advised that:

• Aimee was now at the private school
• Caroline’s business had improved marginally, but to meet the shortfall in expenditure they were currently letting out a room in their house.
• As a result, Stephen and Caroline felt confident in increasing the investment risk of their portfolio marginally to increase the chances of reaching their goal of Stephen’s partial retirement.