A client of ours came to us in his early 50’s. He had been made redundant from a highly successful corporate career and was unsure of his options and his next steps. Not being 55 yet, he felt was too young to retire, but he was tired and disheartened by the all-consuming corporate life he had been leading. He had given his soul to a company that cast him aside just short of what he considered the peak of his career, and he didn’t initially know where to turn: neither from a lifestyle point of view nor a financial one.

Our first meeting with a client is about delving deep into a person’s psyche, trying to get an understanding of what their concerns, opportunities and their strengths are. We need to know where they are today and also what is important to them in the future. If we don’t know where they want to go, how can we help them plan for it?

Proper financial planning is about so much more than pensions and ISAs. It’s about understanding what you need your money to deliver for you in the future, and helping you ensure it does. So that is what we did.

This client had a substantial pension, some investments, a large holding in shares in his former company and a mortgage free home. He couldn’t access his pension, as he hadn’t reached 55, and he didn’t want to exhaust his investments or shares, because it would have created a big tax bill. He also wasn’t sure he could afford not to go back to work, or take a big pay cut.

After getting to know the client we agreed that in an ideal world he would work as a consultant for a few years, picking and choosing his clients, his commitment, and his work life balance; but he wasn’t sure he could afford it. The risk was he wouldn’t get any work, destroying his financial future. In an ideal world he also wanted to buy a holiday home, so he could spend more time there with his family, creating a better life balance, but again couldn’t access the funds without big tax consequences.

So we built a plan for him that started by looking at a Lifetime Cash Flow Forecast. By looking at different scenarios, we established that he could afford to take the consultancy role, because if he didn’t earn another penny, he could afford to live off his capital, just not quite as comfortably. This was a huge relief for him, and gave him the confidence to begin planning his next career step as a self-employed consultant. The Cash-Flow also indicated that he could afford to buy the holiday home, but we still had the problem of where to take the funds from.

As a result, the next piece of the financial plan for him was to borrow against his shares. This meant that he was paying a low level of interest, as well as avoiding creating a large tax charge. This freed up the capital to purchase the holiday home until he had access to his pension scheme. We also moved his existing portfolio with the bank to a better structure, in order to improve the investment returns and reduce the tax burden further.

We then started to assess his Final Salary pension scheme. This pays out a valuable guaranteed income in the future, but, aside from that, he also had the option to transfer a lump sum to a scheme of his choosing. Being in the position he was in, the flexibility to draw different chunks of his pension at different times was important to him, as was leaving what he didn’t spend to his children. So, after much research, we decided it was sensible to move this to a Personal Pension arrangement for him, so that he gained these benefits and many more.

Finally, there was a lot of risk in holding so many shares in one company. So we decided that we needed to sell some of those down. We were able to save a significant amount of tax by using Enterprise Investment Schemes (EIS) and Seed EIS’s to achieve this over a number of years.

When I see this client nowadays at his review meetings, I love hearing the stories of where he has been golfing, how long he has been spending at his holiday home, where he has been on his many other holidays and how his new life is treating him. Without financial planning he could be slogging his guts out in a corporate role, digging himself an early grave. Instead he works the hours he wants, with the people he wants to, which several years on he has never not found. He lives an amazing life, and he is as happy as I have ever seen him. I love the fact that we have helped him create this amazing new life, living out his ‘bucket list’, and spending quality time with his family. Clarity and proper financial planning are so empowering, and so much more than just pensions and ISAs: it is your life. So why not create your ‘Life 2.0’ like he did, and seek out the advice of a proper financial planner.

This is what Efficient Portfolio do, so if you would like a Free Exploration Meeting with them, you can apply for one here.

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