Whatever you are saving for – your wedding or to help your children through university – it is important to have a clear financial plan that can help you achieve your goals. Here is how we helped Peter and Jane.
Peter, who is in his late 40s, works as a senior engineer at a major power company. He earns a good salary, as does Jane, his wife, who is a few years younger than him and is head of science at their local secondary school.
Peter happened to see one of our financial planning seminars advertised at work and signed up. The seminar gave him a good overview of what to think about in terms of general financial planning, covering topics ranging from savings and pensions, to retirement planning. He realised that he and Jane needed to have a proper financial plan and so he booked a financial review with one of our advisers.
“I was relieved when Stuart immediately set us at ease. He asked what had prompted us to see him and a few questions about our income, expenditure, work, family and financial goals.
“We explained that we would like to use the money to help our children through university – the eldest will be going in three years’ time and the youngest in five. We also wanted to help them get on the property ladder in due course.”
Little left over at the end of the month
Stuart takes up the story. “Both Peter and Jane have, very sensibly, been topping up their pensions, and, all being well, are on track for a comfortable retirement. They have a bit of emergency money in a cash account but otherwise have little in savings. They are keen to maintain their current, active lifestyle while the boys are still at home, with a skiing holiday in the winter, a beach-based activity holiday in the summer and plenty of days out and city breaks in-between. This leaves them with next-to-no spare cash at the end of each month.
Equity in the family home
“They had bought the family home around 13 years ago when their second son was born. Thanks to the increase in value combined with 13 years of mortgage repayments, they now have a fair amount of equity in their home. I therefore suggested that when their first son goes to university they could buy a small property for him to live in (possibly rent-free) and rent out the other rooms to fellow students. I explained that the cheapest way of funding the purchase would be to remortgage the family home. I said that I would explain the various tax consequences of buying the property, and of possibly transferring it to their sons’ name at some future date.
TIP : You can withdraw funds from your ISA and if you replace them during the same tax year the replacement funds won’t count towards your ISA allowance for that year.
Likely to exceed the lifetime pension allowance
“I also suggested that they both stopped topping up their pensions. Jane is clearly a high flyer and could be close to exceeding the lifetime allowance for pension savings by the time she turns 50. Peter is fortunate enough to probably be in a similar position by the time he turns 55. I recommended that instead they put the money into ISAs (one each), invested in funds aligned to their attitude to risk and that aim to give a reasonable return over five-to-ten years. This should enable them to build flexible nest-eggs, with no tax to pay when they withdraw money. In due course they could use the money for whatever they want, for instance, as a deposit on a property for their younger son, treating themselves to the holiday of a lifetime when they retire, or even to generate additional retirement income.”
This is just one of the ways we can help. Everyone’s circumstances and goals are different. To find out how we may be able to help book a review with one of our professional financial advisers.
Call 08000 85 85 90 or email email@example.com or contact your usual Lighthouse Financial Adviser.
The value of your investments, and the income you receive from them, can go down as well as up, so you could get back less than you put in. A pension is a long-term investment and inflation will reduce how much your income is worth over the years. Your eventual income may depend upon the size of the fund at retirement, future interest rates and tax legislation. Tax advice with no investment element is not regulated by the Financial Conduct Authority. Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.
* We have changed real names and other details to preserve anonymity. All financial details reflect the circumstances.