Referred by existing clients, Neil and his wife Anne came to me for Financial Planning and wealth management advice. Neil worked as a banker in Canary Wharf and Anne ran her own successful buy to let portfolio.
They were both aged 55, in good health and held £4 million of assets between them, excluding their main residence which was worth around £2 million. They had no debts and Neil held various pension plans worth around £1.3million. They had two daughters, both at university.
Neil had just been made redundant and was looking for a new role. Although they were financially independent, they required their financial affairs to be arranged in a way which gave them full control over their retirement plans. Their long term goal was to build a home in Tuscany for their enjoyment in retirement.
Although among my wealthiest clients, Anne and Neil's core beliefs and values when seeking advice were common to those held by all. Namely:

• An open and honest relationship based on trust and not clouded by financial slang.
• Guidance, advice and a long-term strategy tailored to meet personal and financial objectives.
• Implementation of plans in a considered and intelligent manner.

We met towards the end of the tax year. At our first meeting, we undertook a very detailed review of all Anne and Neil's assets, income and expenditure based on information they had supplied in advance. They had also put together a brief remit of their goals, highlighted what money really meant to them and disclosed their future fears and concerns.
Anne was heavily involved in real estate and had a very good idea of the type of property they wanted to build in Tuscany and how much it would cost to build and maintain. They anticipated a build cost of £1.5million and running costs of £50k per annum.
Neil had the following assets: Isa portfolio £370,000,  Cash £400,000,  National Savings £120,000, Share portfolio £200,000, VCT investments of £325,000,  EIS investments of £180,000. His previous employer had also set up an offshore Employee Benefit Trust which held just under £1million in cash.
Anne was a deferred member of the Teachers Pension Scheme. Her fund was projected to deliver an income of £12,000 and a tax free lump sum of £70,000, payable at age 60. I asked them to both complete a BR19 form so we could get some idea of the level of state pension that they may receive.

Anne's buy to let portfolio, which was owned personally with some properties in joint names, has net equity of £1.4million and a current rental income of £70,000 per annum net, after expenses.
The couple tended to use their annual Isa allowances from surplus income and had never used their capital gains tax allowances.
They both completed a detailed risk profile questionnaire and this was used as a basis for further discussion so we could accurately evaluate their attitude to risk. Neil considered himself as a balanced investor while Anne considered herself an adventurous investor. They both believed their attitudes to risk had remained the same over many years. I suspected that this would change in the future as they headed towards retirement.
The couple had informed me that on their deaths there would be sufficient assets to provide their daughters with a secure financial future. They did not wish to do any inheritance tax planning or make any gifts. Their preference was to help their daughters with wedding costs and a deposit for their first property. However we did review their existing wills for them and they were satisfactory. Additionally, we discussed severing any joint ownership of properties to allow the properties to be held under a tenants in common arrangement. This would also help equalise the value of their respective estates.
Anne and Neil each held a number of life policies. We discussed the merits of placing these into trust for inheritance tax mitigation.
Prior to the meeting I had asked them to think about the age at which they would like to retire, the level of advice they were looking for and how much income in retirement they would need in today's terms. They explained that they would like to have the choice to retire at age 60 and would ideally like an income of £12,000 net per month in today's terms. We discussed in some depth their thoughts on annuity rates, inflation, life expectancy and the level of investment returns required to fund their retirement, based on their respective attitude towards risk. We also discussed potential growth rates and rental yields on buy to let properties. They had no definite plans for the investments but wanted to hold them in a more tax efficient environment if this could be achieved.
We then carried out a lifetime cashflow assessment of their objectives and discussed various scenarios. They were very happy with the results and encouraged by the fact they had ample assets to meet their objectives. They had been careful with their money over their working lives and were pleased when I mentioned that they had surplus capital and income which they could enjoy.

Anne had always wanted to go on a luxury cruise. Neil had always been too busy working and travelling overseas with his job to consider an expensive holiday. I explained that it was time to take advantage of his gardening leave, book some time away and spend some quality time together
Anne is also a very keen cook and really enjoyed growing her own produce. However, due to their busy lives, they felt they have never really fully enjoyed their home. Anne always wanted a much larger designer kitchen and conservatory. I explained that this was easily possible and would cost between £100,000 and £150,000. This gave them the reassurance they needed to go ahead with the project. Working towards an independent financial future is important but I also felt it important for them to enjoy life now. Improvements to their home and a much-needed cruise would be very beneficial for them.
Besides the usual end of year tax planning, I advised them to use gifting rules and to sell enough shares to make use of their respective capital gains tax allowances They had never done this before and as the shares portfolio was pregnant with capital gains tax, I considered it a good tax planning strategy. We would manage this on an ongoing basis and use the proceeds to invest into an Isa every tax year. This would increase their tax efficiency.
In terms of pensions, as the lifetime allowance limit was being decreased from £1.8m to £1.5m we ran several calculations on Neil's pensions and explained the pros and cons for opting for fixed protection. Neil agreed that he wanted to take advantage of this and completed the appropriate HMRC notification form. He was made aware that he had to stop any further contributions while he was on gardening leave. I advised him that this would help him negotiate a different level of compensation as he would not need a pension from a new employer. He was unaware of this and thanked me for the information.
All his pension arrangements were in money purchase schemes and he was unaware that, for some time he had been invested in poorly performing funds. In addition, he had plans with some very old charging structures without guaranteed annuity rates. We discussed the main benefits of consolidation: lower charges and access to a better range of funds managed by external fund managers. Neil consolidated all his existing pension arrangements into one arrangement via a Self Invested Personal Pension Plan (Sipp).

This vehicle provides him with the income he requires, a portfolio to match his attitude to risk and sufficient flexibility to meet his needs in retirement. It is unlikely that Neil will need to buy an annuity as could take income from his other assets. This will enable him to retain the death benefits within his pension; making the arrangement much more attractive both for him and for his beneficiaries due to the inheritance tax planning advantages. Other benefits are ease of administration and online access to valuations at any time.
We also discussed setting up a pension arrangement for Anne to help lower the tax burden on Neil's pension in the future. We discussed the objectives of Neil's Employee Benefit Trust and; as this was effectively another pot of money, we talked about the various types of investments that could be made. Our final decision was to opt for a portfolio of collectives. Fortunately, the existing corporate trustee did their own due diligence on recommendations to make sure that Neil's requirements in retirement are met. They were satisfied with the recommendations made.
Neil's background gave him a fair idea about asset allocation. However, he did not know everything! I challenged him on a number of his thoughts and together we agreed to change the balance of his portfolio to allow him to weather most types of financial storms and increase diversification into some non-correlated assets.
As demonstrated above, the benefit of a client meeting with someone like myself is that it allows a fresh pair of eyes to look at their strategy, point out any weaknesses and see if the plans are on track. Management of assets on its own is superficial if it is not combined with a set of goals. Money means different things to different people. My role is to combine it with Financial Planning to help clients achieve their lifetime goals.

What happened next?
Both Anne and Neil were very satisfied with the cohesive retirement plan and strategy we had put in place. All their assets will work to deliver their desired income in retirement and give them control over their retirement timing.
The cashflow assessment made them think about surplus income and capital and what action can be taken to make better use of these. They were aware that they have a large inheritance tax liability and agreed to discuss this on their return from holiday.
Having a large capital base and significant surplus income does not always mean that everything will turn out for the best. There are often unintended consequences and legislation is perpetually shifting. One thing that is always constant is change!
Anne and Neil came to see me soon after their return from holiday. They had thought things through and decided that inheritance tax planning had become a top priority. We will work together on this to mitigate their liability. There are a good number of sound solutions available which will be easy to implement because their investments are held within flexible arrangements.
There is a great deal to do in the coming year.