Gina is a successful business owner in her fifties. She had been feeling uneasy about her personal finances for some time now, and while she had contributed to a number of pension arrangements offered by previous employers, she hadn’t paid much attention to how they had fared since she started working for herself. Gina had also accumulated a number of ISAs over the years and had no idea about how well the investments were doing.
At our first meeting, Gina produced two carrier bags of papers and asked us to bring some order to her retirement plans. So first up, we spent time talking to Gina about when she would like to stop work and what income she would need to maintain her lifestyle. We then reviewed her investments and other future income streams. It was immediately apparent that a shortfall in retirement savings was probable. To bridge the gap, Gina needed to consider her future savings strategy, which had favoured ISAs in recent years.
Gina’s annual income was £115,000 and she was suffering an exceptionally high tax burden on her earnings above £100,000 due to the progressive loss of the Personal Allowance. We discussed diverting her savings away from ISAs and towards her pension because the pension payments would help to restore the lost Personal Allowance. By doing this, Gina would receive an effective rate of income tax relief on contributions of around 60%, and the additional payments would also put Gina on track to achieve her required retirement income.
We also looked at Gina’s current pension arrangements. We were surprised to find that the bulk of pension contributions were being made from Gina’s personal income, rather than through the company. So we helped Gina set up a salary sacrifice pension arrangement to direct future contributions through her company – a simple step which gave both Gina and the company National Insurance (NI) savings. She would also receive tax relief on the payments immediately, rather than having to wait for her self-assessment form to be submitted.
We then turned our attention to Gina’s existing pension arrangements after discussing the level of investment risk that she was comfortable with. Gina’s pensions were not being actively managed and unsurprisingly the investment results were not as good as they could be. She had a range of pension pots which had different investments, many of which didn’t match Gina’s attitude to risk. Seeing as it can be hard to effectively manage such an array of pension investments, Gina decided to merge her pensions into one modern arrangement which offers an investment strategy attuned to her retirement plans and attitude to risk.
We found a similar situation when we looked at Gina’s stocks and shares ISAs. Once again, we unified them in one place where they could be properly monitored and managed.
Gina can now use our secure client system to view all of her pension and ISA holdings whenever she wants. We are also on hand to talk to her about her finances. As she cannot always meet in person (because her work takes her away from the UK) we use Skype or the phone to keep regular contact – while ensuring her retirement plans stay on track.