Background

Ian is single, in good health and has two non-financially dependent children.  He lives alone and owns his own home and has no mortgage.  He is 62.  Ian has built up a Scottish Widows personal pension worth £250,000.  Apart from his £150,000 home, he has no other assets and he has surplus income of £250 per month after taking into account his regular monthly outgoings which goes towards a ‘holiday fund’.  His parents are elderly and as the only child he is likely to receive an inheritance although wanted to exclude this from any recommendations.  He is concerned about not having much capital to call on in case of emergency and needed to change his car within the next few months due the high mileage he had built up.  The flexibility of his consultancy job means he is likely to keep working for the next 5 years.

Objectives

  1. To give Ian access to £5,000 of emergency capital which will form his emergency fund.
  2. To provide Ian with the £12,000 he needs to change his car.
  3. To keep paying into his pension fund until he retires.

Considerations

We discussed the ability for Ian to borrow against his property or take out a personal loan but he was averse to borrowing any more money due to his experiences about paying off previously held debt.  He said that he had started with nothing and whilst he would like the kids to have something when he is gone, they are not expecting anything from him and want him to do whatever he needs to in order to have a comfortable retirement.

Since the only asset apart from his house was his pension, we discussed the multitude of options available.  We provided Ian with a Retirement Options Report and ensured that before we made any recommendations he was able to make a fully informed decision.

Recommendation

Once Ian felt comfortable with his newly gained pensions knowledge and having considered his attitude to investment risk and his ability to absorb a certain degree of capital losses over the next 5 years, we recommended Ian transfer his Scottish Widows personal pension to a new Flexi-Drawdown plan (available from April 2015) with another provider; his existing provider didn’t offer this plan.

We recommended Ian withdraw £17,000 from the £62,500 tax free cash element available from  his Flexi-Drawdown fund.  We also recommended a suitable investment portfolio which was aligned to the agreed risk level and set up a half yearly adviser review process at which stage we would update Ian on the progress of his pension plan and take into account any changes in his circumstances at that time.

Ian was really happy with the advice he received, that he introduced his best friends shortly afterwards.

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