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CUSTOMER STORIES

In late 2018, Stephanie came to Tideway Wealth seeking financial advice.

She was 41, married with two children, had a well-paid job earning over £100,000 p.a. and also had a pension valued at £1,050,000. She wished to transfer the value to a SIPP which would be managed by Tideway Wealth. The funds were coming from a defined benefit pension scheme.

Mike became her wealth manager and the two set about creating a plan for Stephanie to match her needs in line with her risk profile. This was created by a full fact-finding process and meetings to discuss her objectives and future plans.

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Stephanie wanted to protect the value of the pension for both her and her family.

– Mike, Tideway Wealth Manager

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Objectives

  • In line with her wishes, Stephanie wanted the funds to be invested in a diversified portfolio for capital growth and income, while also trying to limit the volatility within the portfolio. It was agreed to invest in a medium risk portfolio.
  • There would be 16 years before Stephanie could access her pension. This is because the earliest age someone could draw from their pension is increasing: currently that age is 55, but by the time Stephanie reaches retirement, it will be age 57.
  • However, Stephanie wanted to create a plan where she could potentially either reduce or stop work by age 50 and draw from other investments until age 57, when she could then access the SIPP.
  • Stephanie remained in her job and wanted to invest the disposable income she would receive over the next nine years towards the goal of early retirement / semi-retirement.
  • She was realistic that some of these plans may not be practical but wanted to know what funds she could potentially draw from age 50, based on investing at various rates of investment growth over the next 9 years.

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The funds are on course for their return targets.

– Mike, Tideway Wealth Manager

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Plan

  • As Stephanie ‘s pension was over the lifetime allowance and she could not access any funds within her pension until age 57, Mike and Stephanie ‘s agreed to make no further contributions to her SIPP. Instead, they would direct any further funds into other tax-efficient investments, such as ISAs, which were easily accessible at any age. This would equate to contributions of £20,000 a year.
  • Mike created a cash flow plan which focused on maximising ISAs each tax year, to show what funds could potentially be available by age 50, which was based on a variety of illustrative annualised growth rates.
  • They also used the Tideway Drawdown calculator to compare the realistic depletion of capital Stephanie would face from age 50 if she drew different amounts of capital each year. For example, the difference of drawing £10,000 a year versus £20,000, £30,000 etc.
  • They also agreed to transfer pre-existing Stocks and Shares ISAs owned by both her and her husband to be managed by Tideway Wealth. The ISAs had previously not made any return and they were impressed with Tideway’s management of Stephanie ’s SIPP. These were each valued at £20,000.
  • The ISAs were to be managed with a slightly higher risk profile: medium / high, which would give potential for greater capital growth over the next 9 years.

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Current Situation

  • We are only three years into the plan, but £80,000 has been invested and transferred into their joint ISA portfolios over that time. The ISAs are currently valued at just under £90,000.
  • The funds are on course for their return targets, albeit that we are still in the earlier stages of the 9-year plan for investment and 16-year plan to draw funds until age 57, when the SIPP could be accessed.
  • The SIPP has also increased in value over that time period to £1,200,000.
  • Mike and Stephanie have annual reviews to ensure the plans and cash flow forecasts are updated to provide a more realistic picture of the amount that could be drawn from age 50.
  • Mike and Stephanie have recently started to review other sources to provide further tax benefits alongside the annual ISA contributions, such as investing other excess income into VCTs. This will provide tax relief on the contributions to further increase annual savings and also create another form of tax free income each year from annual dividends produced by the VCT.

If you’re looking for another case study, feel free to check out Eric’s story

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The content of this document is for information purposes only and should not be construed as financial advice. Please be aware that the value of investments, and the income you may receive from them, cannot be guaranteed and may fall as well as rise. We always recommend that you seek professional regulated financial advice before investing.