John and Fiona are 60 years old. They have two children Amelia & James (age 32 & 30).
John earns £40k p.a. working freelance in IT, whilst Fiona earns £30k p.a. as a Teacher.
They have £20k outstanding on their mortgage, and no other debts. John has recently inherited £150k following the death of his mother.
Both John and Fiona would like advice on investing some of their inheritance, but are unsure how much. They would also like to help their children with house deposits as both are renting.
key client considerations2
We discussed repaying the mortgage in full which appealed to both John and Fiona. This would also free up £500 p.m.
We agreed gifting Amelia and James £10k each would help them get onto the property ladder in the next 2 years.
We identified an emergency fund of £13k should be put in an easy access bank account (6 months committed expenditure). A further £25k should be deposited in a 60-day notice savings account to pay for holidays over the next 5 years.
We agreed the remaining £72k should be invested for retirement, to support their other income.
After reviewing John and Fiona’s appetite for risk we concluded a Moderate level of investment risk was appropriate.
We agreed to invest £20k each into stocks & shares ISA’s to benefit from tax free growth and withdrawals.
We recommended that John should top up his frozen pension with the remaining £32k. Not only will John benefit from tax free growth, but he will also receive a top up from the Government of £8k. This is known as tax relief.
We explained that their investments should be reviewed on annual basis to ensure they remain on track to meet their goals.
We showed John and Fiona how their financial future would play out using our cashflow software. We included their other pensions and State Pensions as part of our analysis.
John and Fiona were delighted to see their inheritance invested in such a tax efficient way. Not only would their money grow over time, but they also benefited from tax relief of £8k.
Through our advice, John & Fiona also know what their retirement income is likely to be, and how their investments can be used to improve their lifestyle.
Helping their two children get on the property ladder was something they didn’t think they would be able to do.
Not only have they achieved this, but we also advised Amelia and James to feed £4k p.a. into the new Lifetime ISA to benefit from a 25% top up from the Government. All extra money to help them buy that first home.
Reviewing their financial plans annually will give Fiona & John peace of mind that they will have enough money to enjoy a luxury holiday each year, whilst being able to continue this in retirement.
We will also keep an eye on inheritance tax and the performance of their investments, making sure they remain on track.