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Case Studies

Please find below three different case studies illustrating how the different service packages we provide meet the needs of our clients. They may also give you ideas on how to improve your own financial situation.

Retire Early

John (46) and Sarah (44) are married and have two children, Patrick (11) and Anna (7). John is an Account Executive for a major motor firm and Sarah is a Teacher at a secondary school. Buckingham Gate The couple approached us when it became apparent that their provisions for retirement were likely to be insufficient to support the lifestyle that they had imagined in their post-work years.

Their main objectives were to retire when John reached age 63 and enjoy some world travel and to ensure that their family would be provided for in the event that one of them were to fall ill or pass away. You can read in detail about how we helped John and Sarah here.

Save Time & Complexity

Rita (51) is Senior Partner at a GP practice. She is divorced and has two children from her previous relationship, Sanjay(17) and Beth(21). She approached us to assist her in managing the increasing complexity of her financial situation following her divorce, in which she gained a number of new investments. Buckingham Gate Rita has a highly demanding and time-consuming job and so she decided to let us professionally manage her finances on her behalf. In addition to the significant value we were able to add to her financial situation, we also spent upwards of 36 hours working on her case initially as well as the significant on-going management required each year, time that Rita felt was far better spent managing her business and providing care to her patients.

Rita’s main objectives were to optimise her new investment portfolio to provide additional income for her during her retirement, and to ensure adequate protection for her children if she was unable to continue working. You can read in detail about how we met Rita’s objectives here.

Passing on Wealth

James (63) and Carol (64) are married and have three grown up children, Charlie (35), Josie (32) and Sandra (29). James was the Managing Director and Owner of a leading marketing agency and was looking to retire and exit from his business over the coming 12 months. Buckingham GateCarol was a senior partner at a law firm and wanted to continue working for a further 2 years before joining James in retirement.

The couples main objectives were to invest the proceeds of their respective business sales to generate sufficient income in retirement and to manage and mitigate their inheritance tax liability while ensuring a suitable legacy for their 3 children. You can see James and Carol’s full story here.

 

Retire Early – John & Sarah Parker

John (46) and Sarah (44) are married and have two children, Patrick (11) and Anna (7). John is an Account Executive for a major motor firm and Sarah is a Teacher at a secondary school. The couple approached our Chartered Financial Planner when it became apparent that their provisions for retirement were likely to be insufficient to support the lifestyle that they had imagined in their post-work years.

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The couple had the following income and assets:

Income
John – £96,000 p/a
Sarah – £31,000 p/a
Dividend Income – £960 p/a
Savings Interest – £1200 p/a

Assets
Family Home – £560,000
Bank Savings – £130,000
Cash ISA (John) – £7600
Cash ISA (Sarah) – £10,460
Personal Pension Fund (John) – £264,000
Teachers Pension Plan (Sarah) – £11,200 p/a

Following our detailed initial discussion it became apparent that there were some other areas where the couple felt they needed some planning advice. For example, they felt that the family would not be provided for if John were to fall ill or pass away and they were not aware that their estate had grown to a size that meant it would now be impacted by inheritance tax.

We summarised the couples financial and lifestyle objectives as follows:

  • To retire when John reaches the age of 63 with an income of £61,000 per annum in order to maintain their standard of living as well as fund a series of trips to Australia and New Zealand. They required that this income keep pace with inflation.
  • To ensure that the family would be able to maintain their standard of living in the event that either John or Sara where to fall ill or pass away. It was agreed that if Sarah were to pass away, John would like the ability to leave work in order to provide full time care for the children.
  • To minimise the impact of estate taxes and begin a process of gifting money for the children’s future.
  • To use some of the money in cash based savings to fund an investment for retirement. This investment could then be used to provide ad hoc lump sums of capital for luxury purchases during retirement.

Following our initial meeting we set out the scope of work we would complete for the couple as well as the value we felt we could add. We agreed that the Buckingham Gate service would be suitable for their needs and the fee quoted was £2920 for the initial planning work and 1% per annum for on-going advice. This fee would include all of our initial planning work as well as the implementation of all of our recommendations and the full Buckingham Gate on-going service package.

We created a financial model for John and Sarah, which showed them exactly what their financial position would look like in retirement based on their current provisions. We were then able to establish a suitable rate of funding to bring their retirement provision up to their desired level by the time they retired. We were also able to model some “what if” scenarios such as an illness preventing Sarah from working and an early retirement date of 61.

Having completed the model and a detailed analysis of their existing financial provisions, we made a total of 14 different recommendations to the couple to improve their financial life, including the following:

  • Establish a suitable trust to hold John’s pension assets on death to prevent an exasperation of the inheritance tax situation.
  • Establish a suitable trust to hold the proceeds of Sarah’s death in service benefits to prevent inheritance tax being payable on this amount.
  • Purchase of additional guaranteed pension through Sarah’s teachers pension scheme.
  • Funding of additional pension for John to top up the couples retirement income to the desired level.
  • A transfer of John’s existing scheme into a plan with far lower charges and a suitable asset allocation for his needs.
  • Investment of £80,000 into a low cost ISA and unit trust portfolio to optimise tax efficiency.
  • Establishment of adequate protection policies to provide for the family in the event of illness or death. There policies were to be written into a suitable trust to prevent adding further value to the taxable estate.
  • A transfer of assets between the couple to maximise tax efficiency.

Following our recommendation meeting, the couple decided to proceed with all of our recommendations. We had added significant value to their financial and personal lives. While the couple could see that we had added significant value in monetary terms, (see table below) they felt that the in-tangible benefits of our financial planning process were far greater:

  • Piece of mind of knowing that the family would be provided for in the event of John falling ill.
  • Knowing that they could retire two years earlier than they had previously thought.
  • A significant increase in the amount of assets they could pass to their children and the comfort of knowing the children would not face a large inheritance tax liability.
  • The knowledge that their investment portfolio was being managed and re-balanced by a team of experienced investment professionals who conduct hours of technical research on their behalf.
Monetary Value Added
Item Value Added
Potential inheritance tax saving on John’s pension fund £105,600
Potential inheritance tax saving on Sarah’s death in service benefits £37,200
Reduction in costs on John’s existing pension fund £1716 p/a
Transfer of savings assets to maximise tax efficiency £300 p/a
Tax relief on pension contributions £2880 p/a
Total Value Added £147,696

 

* The purpose of this case study is to provide an example of how the Buckingham Gate service packages work in practice and to demonstrate the value that we can add to your financial situation. While the details used do represent typical client circumstances, names and details have been changed to protect our clients privacy.

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Save Time & Complexity – Rita Chopra

Rita (51) is Senior Partner at a GP practice. She is divorced and has two children from her previous relationship, Sanjay(17) and Beth(21). She approached our Chartered Financial Planner to assist her in managing the significant complexity of her financial situation following her divorce in which she gained a number of new investments. Rita has a highly demanding and time-consuming job and so she decided to let us professionally manage her finances on her behalf. In addition to the significant value we were able to add to her financial situation we also spent upwards of 36 hours working on her case initially as well as significant on-going management, time that Rita felt was far better spent managing her business and providing care to her patients.

While the full complexity of her financial situation is beyond the scope of this case study, as is the full scope of our work, the purpose of this document is to provide a guide to how the Buckingham Gate service packages work in practice.

Rita had income and assets as follows:
Buckingham Gate
Income
GP Income – £112,400
Private Income – £11,000
Other Business Income – £5400
TOTAL – £128,800

Assets
£287,000 – Deposit Account Savings
£58,000 – Unit Trust Portfolio – Various funds
£34,530 –  Stocks & Shares ISA – UK Smaller Co’s
£8,380 – Stocks & Shares ISA – Japanese Equity
£43,000 – Personal Pension Plan – Received as part of a pension sharing order
£265,000 – Business Interests
£46,000 p/a – Forecast Pension from the NHS Pension Scheme

Following our initial discussions with Rita, we established that her main objective was to make sure that her children would be protected in the event of her passing away or suffering ill health. With her being the main breadwinner for the family, this objective was of upmost importance. Given the receipt of the divorce proceedings, she was also concerned with making sure that the investment portfolio she was now holding was appropriate for her needs. We summarised Rita’s financial objectives as follows:

  • To optimise the existing investment portfolio to provide capital growth with the option of taking an income in the future.
  • To ensure adequate protection for her children if she were to fall ill or pass away. Rita felt that her children would be dependant on her financially until at least the age of 25 considering they were also pursuing a career in medicine.
  • To draft a new will in light of her divorce as well as reviewing the existing trust structures she had in place to ensure that these reflected her current wishes.
  • To secure the best possible return on £200,000 of her cash based savings in a low risk environment to use for the purchase of a house in the future.
  • To optimise her tax planning in light of her high marginal rate of tax.

Following our initial meeting we set out the scope of work we would complete, as well as the value we felt we could add to her financial and family life. Rita decided that the Buckingham Gate service package would suit her needs as well as save her a significant amount of time and effort. It also appealed that we would liaise with her accountant on her behalf to assist in the completion of her annual tax return. A job which caused her significant stress each January.

We quoted a fee of £7,430 for the initial planning work and the implementation of our recommendations. Given the significant level of on-going service that Rita required, an on-going advice fee of 1% per annum was agreed.

We created a financial model for Rita, which highlighted the extent of the shortfall in funding for the family if she were to fall ill or pass away. We also demonstrated her likely retirement income, which was actually slightly greater than she was expecting as well as identifying a cash-flow shortfall at the point she wanted to purchase new property. As part of our model we established that Rita wanted to take a cautious approach to investment and that many of her existing funds were likely to be more volatile than she would be comfortable with.

Having completed the model and conducted a detailed analysis of Rita’s existing financial provisions we made a total of 16 recommendations to her which included:

  • The consolidation of her existing ISA, unit trust and pension investments into a single, convenient online account.
  • A significant reduction in the level of risk within Rita’s portfolio to bring it in line with her attitude to risk.
  • A change to the asset and fund allocation within her portfolio, which has resulted in far lower costs and reduced volatility.
  • Working with our legal partners to draft a new will including registering a power of attorney.
  • The inception of a suitable life assurance policy to ensure that Rita’s children would be protected in the event she fell ill or passed away. This policy was written into a suitable trust.
  • A further personal pension contribution to gain an effective 60% tax relief on income above the £100k personal allowance threshold.
  • Use of available tax allowances and restructuring of some investments to maximise tax efficiency.
  • The purchase of her commercial property within a pension structure to maximise tax efficiency.

Following our recommendation meeting, Rita decided to proceed with our advice and we took care of all of the administration and paperwork as part of our service to her. As well as the monetary value we added to Rita’s situation (see table below), Rita also commented that she felt our service provided the following additional benefits:

  • Piece of mind that her new will and power of attorney would ensure her wishes were followed should she pass away.
  • The security of knowing her children would be provided for in the event of her illness or death.
  • A significant time saving on her annual tax return – Buckingham Gate now liaises with her accountant to complete this on her behalf.
  • The knowledge that her investment portfolio is being monitored on a daily basis and managed by a qualified investment professional.
  • A much greater understanding of her financial affairs and her likely financial position in the future.
Monetary Value Added
Item Value Added
Tax relief on pension contribution £11,328
Reduction in portfolio costs £1079 p/a
Additional tax savings on investments £230 p/a
Additional return on deposit based savings £3400 p/a
Tax savings on commercial property in pension £1920 p/a
Total Value Added £17,957

 

* The purpose of this case study is to provide an example of how the Buckingham Gate service packages work in practice and to demonstrate the value that we can add to your financial situation. While the details used do represent typical client circumstances, names and details have been changed to protect our clients privacy.

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Passing on Wealth – James & Carol Hartington

James (63) and Carol (64) are married and have three grown up children, Charlie (35), Josie (32) and Sandra (29). James was the Managing Director and Owner of a leading marketing agency and was looking to retire and exit from his business over the coming 12 months. Carol was a senior partner at a law firm and wanted to continue working for a further 2 years before joining James in retirement.

They approached our Chartered Financial Planner primarily because they wanted professional assistance in managing the process of their respective business exits as well as to provide advice in conjunction with their accountant to minimise the tax liability on the sales. Following their business exit they would require a comprehensive financial planning service to structure the resulting assets in a way so as to secure a comfortable retirement for the couple, with a need for maximum flexibility in the first instance.

The couple had accumulated a complex mix of different investments and business assets over the years and some elements of their situation will be beyond the scope of this case study. An overview of their circumstances was as follows:

Income

James:
Salary – £9440 p/a
Dividend (From the business) – £128,000 p/a
Dividend (From his investment holdings) – £22,460 p/a
Dividend (From Venture Capital Trust) – £6340 p/a
Deposit Interest – £6330
Property Rental Income – £21,425

Carol:
Salary – £142,000 p/a
Buckingham Gate
Dividend (From investment holdings) – £1265 p/a
Deposit Interest – £5860 p/a

Assets
Family Home – £1,130,000
Property Portfolio – £360,000
Business Assets – £520,000
Stocks & Shares ISA (James) – £116,000
Stocks & Shares ISA (Carol) – £128,400
Unit Trust Portfolio (James) – £182,000
Unit Trust Portfolio (Carol) – £21,730
Share Portfolio (James) – £134,000
Investment Bond (James) – 54,000
Venture Capital Trust (James) – £109,000
SIPP (James) – £1,412,000
Deposit Account (Joint) – £406,300

Following our highly detailed initial discussion it became clear that the couple had numerous financial planning needs, which they required assistance with. In particular we revealed the size of the inheritance tax liability that the couples beneficiaries would face in addition to some tax inefficiencies within their current income and asset holdings. Following a further meeting we defined some specific planning objectives some of which were as follows:

    • To ensure a smooth and tax efficient sale of the respective businesses with the proceeds to be included within a comprehensive retirement income strategy. The couple wanted to maintain an income of £75,000 per annum and have the ability to draw on substantial capital if required to fund ad hoc purchases.
    • To liaise with the couples accountant to assist in the completion of complex tax returns involving the sale proceeds of the business and multiple streams of investment income.
    • To streamline the couples investment portfolio to enable efficient administration and tax accounting in retirement.
    • Formulate recommendations to enhance the tax efficiency of the investment portfolio and income streams.
    • To provide an executive summary of the inheritance tax position which would form the basis for further discussions the following year. The couple did not wish to address the complexity of estate planning along with their retirement plans and so we added some bespoke elements to our service package including additional focussed estate planning meetings over the course of the following year.
    • The formulation of a suitable asset allocation for use during retirement and the rebalancing of the existing portfolio to meet this new allocation.
    • To design and build a bespoke investment portfolio for the proceeds of the business sales. The main requirements were for tax efficient withdrawals on an ad hoc basis to fund the couples lifestyle aspirations in retirement.

Given that the clients wanted to hand over the management of their complex financial affairs freeing them up to enjoy retirement they decided that the Buckingham Gate service package suited their requirements. As part of our letter of engagement detailing the substantial scope of work we would complete for the couple, we quoted a fee of £11,290 for the initial planning work and 1% per annum for the substantial on-going service to be provided. This fee would include the implementation of all recommendations.

We created a highly detailed financial model for the couple over the course of 2 meetings dedicated to its production. This allowed James and Carol to see how long their chosen retirement income could be sustained for and also the trade offs and options available to them as they moved through retirement. We built a series of sensible assumptions to drive the model and accounted for future tax and inflation. One of the main insights the cash flow model provided was that the couple would need an average investment return of 4.1% in order to maintain their chosen lifestyle throughout retirement. James and Sandra had an adventurous attitude to risk; however following our discussions they understood that they could adopt a more cautious strategy and still achieve their goals. Given that they were relying on their investments to fund their retirement this seemed a prudent strategy.

Having spent in excess of two weeks preparing a comprehensive financial planning report for the couple and analysing their existing plans we made a total of 32 different recommendations. We pride ourselves on looking at the finer detail as well as the big issues and as such made some small tweaks to the way in which James paid himself to reduce the National Insurance liability. Some of our other recommendations were as follows:

        • A new, low cost on-line platform to manage the majority of the investment accounts and simplify the tax reporting each year.
        • The shift of some assets from James to Carol to make maximum use of her available tax bands and allowances.
        • A significant reduction of risk within the investment portfolio which required a complete re-design of the asset allocation and fund selection.
        • New pension contributions to make the maximum use of the tax relief available in the final years of work.
        • The application for protection from the lifetime allowance tax charge.
        • The implementation of a full retirement income strategy which included both fixed and variable pension income sources as well as tax efficient withdrawals from other investment sources.
        • A number of simple, small gifts would be made into trust to begin the process of estate planning with a more thorough strategy to be developed over the following year.
        • To nominate the un-crystallised death benefits of James’s SIPP into a spousal bypass trust.

James and Carol saw significant benefit in our financial planning service and were able to retire as planned with a detailed strategy in place for their income and capital needs. They handed over the administration and reporting requirements of their investments, which they felt saved them around 40 hours per annum in administration. In addition to the above we added significant value in monetary terms also:

Monetary Value Added
Item Value Added
Application for protection from the lifetime allowance £89,100
Pension tax relief gained on new contributions £32,200
Reduction in investment costs £15,360 p/a
Reduction in income tax due to asset switch £6402 p/a
Reduction in capital gains tax due to asset switch £10,540 p/a
Inheritance tax savings on initial recommendations £2400 p/a
Potential inheritance tax saving on John’s SIPP £666,600
Total Value Added £822,602

 

* The purpose of this case study is to provide an example of how the Buckingham Gate service packages work in practice and to demonstrate the value that we can add to your financial situation. While the details used do represent typical client circumstances, names and details have been changed to protect our clients privacy.

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See the benefits of life-time cash-flow modeling. Faith Glasgow, Managing Editor of the Money Observer, talks to Matthew Smith about the importance of life-time cash-flow modeling in determining whether you might run out of money in retirement. Click here to watch video.