Keith and Lorna have reached retirement age (65) and finish work in 1 month. During their working life they have accumulated savings and investments of £250k.
Their pensions from Foster Engineering will provide and income of £30k p.a. after tax. They also have their State Pensions which will provide a further £15k p.a. This comfortably covers their committed outgoings and day to day lifestyle.
They would like to set a luxury holiday budget of £20k p.a. using their savings and investments, but are unsure how to withdraw the money and how long it will last.
key client considerations2
Keith and Lorna want to make their money last as long as possible.
They hold £80k each in Stocks and Shares ISA’s, £40k in Unit Trust investments, and £50k in savings. The Unit Trusts have a capital gain of £15k. They haven’t used the current tax year ISA allowances of £20k each.
They have always been risk takers, and this is reflected in the Dynamic investment profile for their existing investments.
After reviewing Keith and Lorna’s appetite for risk, we concluded a Moderate level of investment risk was appropriate as they start to decumulate their investments.
Now they have stopped working they have less scope to replace their savings if they fell in value by a considerable amount.
We reviewed the investments and advised them which investments had performed well, and which not so well.
We concluded the portfolio carried too much risk and a change of strategy to reflect decumulation was required. We recommended an investment strategy that reflected Keith & Lorna’s Moderate risk profile, that would provide an income of £5k each quarter over the next 10 years.
We recommended half of the Unit Trusts be transferred into Lorna’s name. They could then all be sold utilising both of their annual capital gains tax allowances. This presented an immediate tax saving, with the monies now freed up for the new investment strategy.
Keith and Lorna could now see how investing for income as oppose capital growth would suit their needs going forward.
The new investment would carry less volatility and risk.
Whilst they appreciated their savings and investments would be depleted over the next 10 years, they would be doing so in a manageable way.
Keeping their investments under review along with their income and expenditure means we can tackle any changes to their circumstances.
Whilst long term care is not at the forefront of their minds, they know this may need greater consideration in the future. Having a financial adviser to discuss such matters and reassure them now and in the future, is of great importance of Keith and Lorna.