The client scenarios described are drawn from a mixture of client circumstances rather than referring to particular clients of Gresham. They are intended to provide an insight into the areas and range of advice available from Gresham.
James and Sally – a young professional couple
James and Sally are a professional couple working in the technology and media industries and are in their early 30’s, having married a couple of years ago. They own their own home valued at £600,000 as well as Sally’s old flat valued at £200,000, which is now let out. Their student loans have recently been repaid. Their mortgage is now easily affordable and the rent from Sally’s flat covers the outstanding mortgage. They are thinking of starting a family. They sought advice on their financial planning from Gresham and we advised that they:
- Review their life cover so that it met their present and future needs. This will ensure that at the least their mortgage is repaid so that the survivor can be certain of a secure home for themselves and the children.
- Consider income replacement plans and critical illness protection in case either of them suffers a major illness or incapacity and are unable to work. By doing so, they will ensure that their income does not suffer and they can continue to afford their mortgage repayments and other bills as well as any care which might be necessary.
- Begin saving into pension arrangements above the minimum provided by their employers. Long term savings, with tax relief, will allow them to build funds for their future and be in a better position to decide when they want to cease full time work.
- Speak to a solicitor and have simple wills drawn up, for the moment leaving assets to each other. They should also consider who should be guardians for their children.
Susan and Martin – recent “empty nesters”
Susan is a chief executive of a national charity, Martin a Head of Department at a local senior school; they expect to work for another 10 to 15 years. Their three children have now left home, though the youngest daughter will probably return for a while after finishing university this year. Their two eldest children have now started families of their own. With mortgage and other liabilities cleared, Susan and Martin would now like to prioritise their own financial planning. Gresham advised that they:
- Review their pension funds. Martin was advised to start making additional voluntary contributions to the Teachers Pension Scheme while Susan, who had a number of pension arrangements from previous employments was advised to bring these together in a single plan so that the assets could be more effectively managed, She is also to increase her contributions substantially. Both will get tax relief on their pension contributions – at 40% for Martin and at 45% for Susan.
- Start making the maximum annual NISA contribution of £15,240 each to build another tax advantaged fund which in future could be used to provide a tax free income.
- As they now feel comfortable taking more investment risk, they will consider investing into Venture Capital Trusts – investments into smaller companies with 30% income tax relief on the investment and tax free dividends, so long as the VCTs are held for at least 5 years.
Brian and Gillian – a retiring couple
Brian and Gillian are in their late 60’s and have now fully retired; for some years both continued in consultancy, after leaving their respective legal practices. They have good pension funds which will provide for their income needs in the future as well as savings of over £1 million. Consideration is being given to moving to a smaller property, releasing at least £500,000. They have two children who have received substantial financial assistance in the past and 7 grandchildren, one of whom has learning difficulties. They would to provide a start in life for the grandchildren as well as making sure that the likely inheritance tax on their estate is minimised as much as possible, without getting involved in potentially contentious schemes. Gresham advised that they:
- Review their wills which have not been reviewed for over 20 years and are now out of date. In this, they can make sure that both the survivor is financially protected and that assets are directed to the right heirs.
- Set up a discretionary trust of which their seven (and maybe any future) grandchildren are the primary beneficiaries to be funded from some of the capital released on the sale of their home. This will allow the trustees (probably their children, assisted by their solicitor) to direct funds to whichever child might require the funds and at whatever time, in particular being able to provide more assistance to the grandchild with learning difficulties. The trustees will have the flexibility to appoint capital in unequal shares if the circumstances demand.
- Review their investment portfolio ensuring that its objectives and risk characteristics are aligned with those of Brian and Gillian. An earlier review showed significant capital gains on some investments and consideration is being given to realising these gains, reinvesting the gain into Enterprise Investment Trusts – investments into smaller companies which allow gains to be deferred for 3 years, 30% income tax relief on the initial investment so long as held for 3 years and as the investments qualify for Business Property Relief, they will have 100% relief against inheritance tax after two years.