Savings and Investments Case Study

Savings and Investments Case Study

Client Objectives

This client came to see me with a number of different insurance policies in place that he thought could be excess to requirements. Meanwhile he wanted to start saving to buy a holiday home. He had nothing in place at that time.

Work Carried Out

I looked at the various life assurance and income protection policies that he had in place. As expected he didn’t need the levels of cover he had and with so many different policies he didn’t have the right ‘shape’ of policy either. We therefore put in place one new life policy and one new income protection policy that matched his current circumstances. The other policies were cancelled. This saved the client £200pm.

With this money and additional savings, I set up a new stocks and shares ISA for him and his partner into which they could make regular monthly contributions.

Having assessed the level of risk they were comfortable taking, the timeframe for the investments and their willingness to be involved with the choice of investments, I then recommended an ISA provider for them and also a mix of investment funds into which they should invest their regular contributions. The combination of investment funds together were assessed to make sure that the overall risk matched that of the client.

Value to the Client

The couple now have a regular savings plan in place that is building up their savings in a tax efficient way. The ISA provider is very easy for them to use and access information and the whole process proved very simple.

The client is now able to increase or change his levels of regular savings and will be able to access them easily once he finds a holiday home he’d like to buy.

Insurance Case Study

Client Background

The client came to see me with 7 different policies. He had 3 joint life assurance and critical illness policies, a family income policy, and an income protection policy. The client had recently re-mortgaged his property and had a new 25 year mortgage term. He was self-employed and also needed insurance to cover him if he couldn’t work due to illness.

Work Carried Out

With life and critical illness policies you usually arrange cover for the mortgage to match the repayment term and the amount of the mortgage. None of the policies the client had were the right ‘shape’. Although he had sufficient cover for the mortgage, all of the policies had a term that was 10 years too short to cover the full mortgage period. It was not possible to make the necessary changes to the existing policies, so the only option was to find a new policy that could give the right size and shape of cover and then cancel the existing policies.

In all, 4 policies were replaced with one that gave exactly the right level of cover for the right length of time, and also managed to save £55 per month in premiums.

A Family Income Policy is designed to give the surviving spouse an income to cover monthly expenditure. The level of cover looked quite high but we decided to keep the policy running as the premium looked good relative to taking out a new policy.

 Income Protection

With the Income Protection policy, the level of cover and term were both fine. However the premium seemed very expensive. Comparing with other provider’s policies offering the same features and options, we were able to find a similar policy for half the cost in premiums. We therefore took out a new policy at the lower premium level and cancelled the existing policy. This saved the client £75 pm.

Value to the Client

The client now has exactly the right policies in place for his current circumstances He has peace of mind that should anything happen to him his wife will be able to cope financially, and that if he is unable to work due to illness he will be able to cover his outgoings every month, including his mortgage payments. In total, we managed to save the client £150pm by replacing a number of old or expensive policies with new ones that gave the required level and term of cover.

Pension Savings Case Study

Client Objectives

This client came to see me to seek advice on how much she needed to contribute to her pension. Her company were making employer contributions into a company pension. She wanted to know whether she should and how much she should be contributing in order to achieve her desired income in retirement. She had one other pension with a previous employer. She was married with two young children.

Work I Carried Out

The first thing I did was to project forward the couple’s expenditure to retirement age and adjust for items such as mortgage payments, life assurance and school fees that would no longer need to be paid. This gave an idea of the level of pension income that would be needed to cover the likely outgoings. I then projected forward the potential pension pot she might have by the time she retired based on employer contributions continuing at their current level and a small amount of growth in the pension fund investments.

This gave a projected ‘pot’ at retirement age. I then used current annuity rates to give an idea of the sort of pension income that this size ‘pot’ might generate if she were to buy an annuity. (An annuity gives a guaranteed income for the rest of your life. It may not be the choice you make at retirement but is easy to ‘model’). It was then possible to compare the projected income with the projected outgoings to see what the size of the ‘gap’ was likely to be. This could then be translated back to assess how much her employee contributions needed to be.

The next step was to see if this was affordable given the couple’s current income and expenditure and to look at other considerations such as tax planning. Tax considerations also needed to be taken into account when looking at how she would draw her retirement income. As a result of this analysis I concluded that they should also start to build up her spouse’s pension. This would mean that he could build up a retirement fund and take retirement income that would be taxed separately and probably at a lower rate.

Value to the Client

The client now has peace of mind that she will be saving sufficient to provide her a comfortable income in retirement. This is being done in the most tax efficient way when considering both pension contributions and retirement income.

Retirement Case Study

Client Objectives (My Brief)

This client came to see me with 7 different pensions. He was a few months away from his 65th birthday and ready to retire. He’d received a lot of documents from the pensions companies but didn’t really know what to do with it all.

His objective was to cover his monthly outgoings in retirement and then have enough to be able to enjoy life in the next 10-15 years. He wanted someone to work out his best options.

The Services and Work I Carried Out

 As part of finding out about client details, I discovered that he had high blood pressure and diabetes. This made it worthwhile getting quotes for something called an enhanced annuity. An annuity provides you with a guaranteed income for the rest of your life. In this case I managed to get a 16% increase in the amount he would have received on a normal annuity. This made it a much better option and one worth considering more seriously as a means of providing the guaranteed income they wanted.

I then looked at this and other possible retirement options to see which would produce the best outcome to cover their regular day-to-day expenditure. To do this I produced a number of cash-flow statements. These showed their possible pension income including contributions from their State pensions compared to their expenditure.

As well as the financial elements, I also looked at other things they should consider as part of the decision, like death benefits for his wife, and children, optimising their income tax position, and getting the balance between taking guaranteed income, cash in the bank and more flexible pension income.

Results and Value to the Client

The outcome of the analysis and advice was that the client achieved a good level of guaranteed income to cover their day-to-day expenditure needs whilst also keeping some of the pensions to be used more flexibly and to pay for the ‘extras’ in life and that will provide better death benefits for his wife and children.