Making the complex simple

Lori was in her mid-40’s when she contacted us in 2017. Lori works for a global financial services company based in Edinburgh as a project manager. Kenny, her husband, has built a successful career contracting as an IT software developer, also in the financial services sector. They do not have children or financial dependents and have paid off the mortgage on their home.

Both of them had accumulated a complicated array of pensions and other financial products over their careers, due to the fact that they had both worked for a number of different companies.

Lori and Kenny approached us as they felt that it was the right time for them to think about the next stage of their lives, particularly their finances.

Our approach

We met with Lori and Kenny in January and at this initial meeting discussed their financial goals, attitude to risk and their current financial position. Lori and Kenny agreed that their key goals were to:

• both retire at 55 or earlier if possible
• simplify their finances
• establish if their existing pension contributions were appropriate and whether their surplus income should be used for an alternative type of investment

We worked through each of their 18 current pensions and investments, advising on the best course of action. We recommended that Kenny retain one of his four pension schemes and consolidate the other three into a new personal pension scheme and that Lori should do likewise (retain two and transfer one). We also recommended that they channel some of their cash savings into equity ISAs to achieve better returns and keep the balance as an emergency cash fund, in a bank account paying a competitive interest rate, for the house renovation expenditure that they had planned over the next couple of years.

The table below illustrates how our advice simplified Lori and Kenny’s financial affairs:

Lastly we advised on an appropriate investment platform that would allow Lori and Kenny to hold the majority of their financial investments in one place. Having most of their investments and pensions on a single platform gives them a greater sense of control over their finances, allowing them to review performance whenever they want. It also reduces the amount of paperwork and administration.

In the weeks after we issued our report we assisted Lori and Kenny implement the various actions.

Lori and Kenny were very happy with what we have done for them and they have recommended us to another couple who we are now also working with.

Now they both know that they are able to retire at 55 on a joint annual net starting income of £30,000 (rising to £45,000 when their company pensions kick in and they hit state pension age). We have given them cash-flow forecasts showing how their investments will provide them with income over the next 30 years. These forecasts can be flexed to show the impact if one or either of them decides to change their proposed retirement age.

Now

We now provide Lori and Kenny with an annual review of their finances. At our first review meeting Kenny wanted us to advise him on whether they would have enough money to purchase a holiday cottage and still meet their income targets on retirement. We were able to illustrate how Kenny could do this using his tax-free lump sum allowance and gave him projections to reassure him that this goal was achievable without a significant impact on his income in retirement.

Names and other details that could potentially identify our clients have been changed to protect their privacy.