Especially when these are all tied up in assorted pension plans, funds and investments that have built up over a lifetime’s working. This case study illustrates how we helped Paul work towards an evolving but planned retirement, making what was available to him work smarter and better for him.
Paul was referred to Miller Knight in 2007, aged 57. Paul enjoyed a successful career in television advertising running his own media business and had a good understanding of his finances, yet knew his money could work better for him in securing the retirement lifestyle he wanted to plan towards.
The problem
Through his career, Paul had accumulated three Personal Pension plans, two AVC funds and a deferred Defined Benefit (Final Salary) pension. He also had a number of investment ISAs, a direct shares portfolio and cash deposit accounts as well as funds in the business.
Paul’s main concern was what all these savings and plans were actually going to provide for him. Advice he had been given intermittently always resulted in a new plan being established, but he had never received advice that took into account his overall position and how his personal finance objectives could be met. He knew he would want to stop working between the ages of 62 to 65, but continued to enjoy the challenge of work for the moment.
He also doubted the tax and growth efficiency of his existing investments, and did not clearly understand the options regarding his pension arrangements. Paul thought his many different pension and investment plan providers offered diversification, but on analysis his underlying investments were all the same.
The Miller Knight solution
When we first met, we discussed how Paul’s time would be spent if he were to stop working. Having focused on this, together we established interests that could be pursued and resurrected from the past when time was not so ‘free’. This started a thinking process that resulted in trips to Europe to reconnect with friends, long-haul travel to take advantage of his partner’s extended work holidays, rekindling his interest in photography, improving his French and learning how to play a musical instrument proficiently. To meet this lifestyle on a more continuous basis in full retirement, we established an amount that would be required.
After collection and analysis of the hard facts of Paul’s financial position, we presented a report which clearly showed:
- what he had
- where it was invested
- what risks he was taking, and
- what he could expect to receive at ages 62 and 65.
We helped Paul understand how his investments and pension plans could provide income at any point so that he could phase into retirement in the future. This provided him with the reassurance that he could draw income as and when required to meet his lifestyle if he reduced his workload, or the business was not so successful in the future. We showed forecasts of his capital and income availability to meet his requirements through his retirement.
Paul did not need to take as much risk with his investments to reach his objectives and we provided advice on how to reduce his risk of capital falling – which was very timely as the banking liquidity crisis struck. We were able to reduce his exposure to risk assets by around 25% and provide him with a coherent investment strategy to meet his needs. Since 2007, Paul has seen how his money is performing against agreed benchmarks and how this level of return meets his needs for income.
It has been an interesting time for investment returns since Paul has used our services, with banks being rescued, a severe recession, the Euro crisis and countless other crises. Throughout, Paul has been reassured and his investments have gained by 34%, providing an additional £183,000 against a benchmark gain of 12.86%. Paul receives an update on his investment returns and commentary each quarter, and we review progress to his objectives each year through our Strategic Review. We speak and email on questions and issues as they arise for Paul throughout the year. He has also recommended friends to Miller Knight.
Paul is now phasing into retirement by taking regular tax free lump sums and taxable income from his pension funds and investments. He received an additional £27,000 tax free from his AVCs and an additional £35,478 of net income by taking his Defined Benefit pension two years early.