As we all know, life does not move in a straight line. During certain phases – and not just retirement – we find ourselves needing to spend more. At other times, we may be in a position to invest significantly larger sums.
This is why at Weatherbys we look at all aspects of your financial life. We examine the full picture of your finances. We consider your assets, your income and your outgoings and assess your future spending requirements.
Once we have understood your goals and looked at any existing investments you may have, we will apply our three key areas of expertise:
- cash flow and tax planning
- structuring your affairs efficiently
“Not only will a plan help you to save and eventually spend your money in the most tax-efficient manner, it will also give you a deeper understanding of what you are working towards financially.” – Nathan Valbonesi, Senior Financial Planner.
What is a cash flow plan, and why do you need one?
As part of this, we focus on having a financial roadmap in place, in the form of a cash flow plan that will help you map out your financial requirements and will demonstrate how various different scenarios might affect those needs. Not only will a clear cash flow plan help you to save and eventually spend your money in the most tax-efficient manner, it will also give you a deeper understanding of what you are working towards.
The sort of questions we ask to help you include: where do you want to be in 20 years’ time? What will you need to fund during that time? Do you need to consider school or university fees for your children? Are you making the most of your pension and ISA allowances during your peak earnings period? This is particularly important to consider given the radical reduction in pension contribution allowances in recent years.
How Weatherbys can help
Even if you are comfortable that you have sufficient assets to fund your goals, a cash flow plan will help you to make the most of your wealth. For example, I recall one new client who came to us for advice having already retired. He and his wife had various savings pots between them: ISAs, a SIPP and a general investment portfolio, with many investment managers involved across the board.
So, we looked at developing a cash flow plan. We assessed their current and future income needs, including allowances for gifting money to minimise inheritance tax, and concluded that he and his wife had sufficient assets to meet their goals, even assuming a relatively modest rate of annual return on their investments.
Yet their pensions, which were being managed by another firm, were invested in higher-risk assets that they were being charged a premium for. We were able to offer an alternative – a lower charging, lower-risk portfolio that could still comfortably meet their cash flow needs until they reached 100 years old. Naturally, they were very happy to take our advice and for us to manage their pensions.
Finding value for our clients
A cash flow approach can also identify opportunities that you may not have been aware of. Did you know, for example, that a child can contribute up to £2,880 a year to a pension that then attracts basic rate tax relief? A grandparent contributing this on the child’s behalf could, in many cases, exempt the gift from their estate for IHT purposes. This could build up a very generous pension pot for the child by the time they reach age 21.
Once you have a plan in place, it must be reviewed regularly because circumstances change. For instance, you might inherit money or find that unexpected expenses arise. This is particularly important as you get older and move away from accumulating your wealth to ensuring that you have the cash flow to maintain your standard of living, and perhaps planning for your legacy.
Investments can go up and down in value and you may not get back the full amount originally invested.