Client case study: Retirement planning with your partner
If you have a partner in your life, talking about your retirement plans together will help both of you take stock of what you’ve got, what you need to do between now and retirement and what that means for both your futures in work.
Last Updated: 27 July 2023
Regularly checking in on your pension(s) and retirement plans can make a huge difference to whether or not you can achieve the lifestyle you want when you stop working.
But sometimes life gets in the way and it’s easy for months or even years to fly past and by the time you check in again, there’s a lot to do.
If you have a partner in your life, talking about your retirement plans together will help both of you take stock of what you’ve got, what you need to do between now and retirement and what that means for both your futures in work.
My clients, Mr and Mrs Ford came to me as investors with a reasonable amount of knowledge but had found themselves with very little time to stay on top of managing their pensions and other investments. As more time passed, the questions started to mount up about when each of them could retire, what they should do with their numerous pensions and what the implications were if they wanted to contribute more during the remainder of their working lives.
I made a new year’s resolution to get back in touch with our retirement plans as a couple and felt I needed some help with some of the more complex decisions relating to my pensions and investments.
- Mr Ford
Is financial advice for you?
If you find similarities to your own situation in this case study, there are still likely to be some differences which mean you’d need to make different decisions. This case study is an illustration. Please don’t use it to make personal decisions. Always seek financial advice if you’re unsure.
Investments go up and down in value and you could get back less than you invest.
Lifestyle changes and future retirement planning
When the Fords came to me, Mr Ford wanted a break from full-time employment in the near future whereas Mrs Ford who had been working part-time wanted to increase her hours so as to open up more career options.
That posed questions around saving into and accessing pensions if they went down to only one working income. For Mrs Ford in particular, it also raised questions of how best to leverage and manage her pensions to hit her retirement target but also to live comfortably now.
For both of them, another big factor was making everything easy to manage so that they could put their hands back on the wheel and manage their retirement plans and pensions themselves going forward.
Getting their balance back
Naturally, a big part of checking the health of the Fords’ future financial plans was looking at their investments.
Because their investments hadn’t been reviewed for a number of years, there was some rebalancing and consolidation to be done. That meant looking at their HL Self invested Personal Pensions (SIPP), plus current and past workplace pensions to get a holistic view of the risk in their portfolios. From there I was able to recommend adjustments in the balance of equities and the types of markets they were invested in.
In terms of making it easy for them going forward, I recommended that Mrs Ford transfer part of another pension into her HL SIPP, and made sure she wouldn’t incur high exit fees or lose any valuable guarantees or benefits by doing so. This meant more of the total could be managed in one place. I was able to reduce the overall cost of her pension, partly due to the Loyalty Bonus on many funds on the HL Wealth Shortlist.
I then built a portfolio suited to the Fords’ risk profile, based on HL’s in-house investment expertise, which would make things easier for them to manage going forward.
An open goal thanks to Mrs Ford’s employer
Mrs Ford’s workplace pension offers very generous employer contributions. When looking at how much extra the couple might be able to pay into their pensions, this was a very easy win.
A big increase in contribution to her workplace scheme only cost a comparatively small amount in take home pay, due to tax relief and the employer adding the national insurance sum they saved on the extra salary being sacrificed. This will give her retirement plans a very healthy boost over the rest of her career with the company.
Please bear in mind that you’ll usually need to be at least 55 (rising to 57 from 2028) before you can access the money in your pension. Pension and tax rules can change and any benefits will depend on your circumstances.
Paying off their mortgage
Paying off debt is often a big leap towards greater financial freedom. Provided you can do it within your means.
Mr and Mrs Ford had enough in their Stocks and Shares ISAs to withdraw what they needed to pay off their mortgage, free of capital gains tax. A huge help in freeing up money for them to live comfortably now whilst contributing more to their retirement savings.
Advice that pays for itself
I knew a financial adviser would be able to help with our pensions and retirement planning but I didn’t consider that Steve would also help me understand our tax allowances and how we could use them effectively. I was very impressed by Steve’s up to date knowledge. It saved me a lot of time, it helped our plans feel robust and perhaps best of all, the tax saving alone more than paid the advice fee.
- Mr Ford
As I presented the Fords with the options and confidence they required to move forward with their retirement plans, I also explained the impact their next actions would have on the tax they pay.
By making a one-off payment into an HL SIPP, Mrs Ford was able to get her personal income tax allowance back. This coupled with the tax relief on the contribution meant she effectively saved over £20,000 in tax.
I also pointed out that there was unused annual pension allowance which could be rolled over. This is in addition to the standard allowance, which was increased from £40,000 last tax year to £60,000 this tax year. The Fords will be able to take advantage of this over the coming years.
Making retirement planning a family affair
One final consideration was the impact their new setup would have on their children’s futures.
The increases in pension contributions and movement of some money out of ISAs and into pensions has meant less of their wealth now falls into their taxable estate when it comes to inheritance tax (IHT). As Mrs Ford owns more than one property, reducing her children’s potential IHT liability where she can is essential. Again, please remember that tax rules can change in the future.
The Fords also have Junior ISAs set up for their two children. They’re already contributing to these and are able to continue doing so despite increased pension contributions.
Could our advisers help you?
If you’re unsure about your financial future or whether you’ve got the right financial strategy in place, our advisers can help. Like Steve helped Mr and Mrs Ford, any of our advisers can assist you in making complicated decisions and give you confidence you’re on the right path.
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