Alastair, a 62-year-old contractor in the oil and gas industry, had been made redundant. With little prospect for finding new work quickly, he and his wife, 59-year-old Sandra, were at a crossroads.
The couple thought they’d have to work for a number of years before retiring; however, our planner demonstrated they could retire now and still afford everything they wanted to do, including a holiday of a lifetime to Australia and buying a second home abroad.
The couple are married with two grown-up children. Alastair contracted or his services as a process engineer to the oil and gas sector through his own limited company, with both holding shares.
When Alastair was working, he commanded almost £1,000 per day. With our advice, he’d carefully built up his pension pot and was retaining a considerable sum of money in his company, while also paying between £2,000 and £2,500 a month into a company-owned offshore bond.
This strategy had led to significant investment gains over the years.
The couple came well prepared for our annual review having filled in the detailed expenditure questionnaire, and provided the last year's bank statements, all of which we used to complete a detailed financial model.
Whichever way we looked at it, the result was the same, they could both walk away from their jobs in complete confidence they could do everything they had talked about.
They could not only afford a property abroad but could give themselves an extra spend of £15,000 a year for the first ten years of retirement, in essence, “fun money” for things like holidays that they could enjoy while relatively young and healthy.
With both retired and earning similar incomes, it made sense to split the company shares evenly. And as Alastair wasn’t working, it wasn’t necessary for him to take the small salary from the company. Instead, the plan was to drip feed dividends out of the company.
As for his pension, the plan is to use the company’s assets first, which should last around seven years, and then access the available tax-free cash and draw down carefully on the pension, ensuring his income remains within the basic rate for tax.
By that time too, he would also have a pension from his time in the Merchant Navy, and the couple would both be taking their state pensions.
We left the offshore bond asset allocation largely as it was, with a slight bias towards equities, and revisited the Expression of Wishes nomination so that both children are included as possible beneficiaries, along with Sandra.
Fast forward to today, and Alastair and Sandra are enjoying their retirement, splitting their time between their homes in the northeast of Scotland and Portugal.
This case study is based on real clients from our Financial Planning service at Acumen Financial Planning.