Case Study: Financial Planning for a Barrister - Achieving Retirement Goals
Client Overview:
A 51-year-old unmarried barrister sought our help navigating several financial challenges. He was particularly concerned about his retirement planning, high tax liabilities, variable income, and property ownership.
The Challenge:
The client struggled with a clear retirement plan and was paying a significant amount in taxes. His fluctuating income made it difficult to keep up with varying tax bills, and he found it hard to save consistently for his pension each tax year. Additionally, owning a rental property added complexity. As an additional-rate taxpayer, he was paying 45% tax on the rental income, which was not tax-efficient.
Wealth Management Solutions:
Our wealth management team conducted a comprehensive financial review, taking into account the client's unique situation. We focused on:
Values and Goals: The client’s primary goal was to retire before reaching the state pension age.
Risk Appetite: We assessed his risk tolerance to recommend suitable investment options.
Existing Assets: A thorough analysis of his financial situation, including his current pension and rental property equity, helped us craft the best strategy.
Our Recommendations:
Continue Regular Pension Contributions:
We advised maintaining regular pension contributions but identified that the current savings were insufficient to meet the client’s retirement goals. Although increasing these contributions was not affordable at the time, we committed to reviewing this regularly as the client’s situation evolved.
Sell the Rental Property:
The client faced a difficult decision regarding his rental property. After a year of consideration, we agreed that while the property had potential value, it was not tax-efficient in its current state. Selling the property would free up capital and allow for a more strategic financial approach.
Increase Pension Contributions After Property Sale:
With the rental property sold, we recommended larger pension contributions, which had several benefits:
The client could substantially increase the value of his pension.
Larger pension contributions significantly reduced his tax bill, making his financial situation more predictable and manageable throughout the tax year.
Outcome:
By implementing these strategies, the client retired at 60, achieving his long-term goal. We continue to manage his assets during the decumulation stage, ensuring his financial security as he transitions into retirement.
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Disclaimer: This case study is for informational purposes only and should not be considered financial advice. Please consult with a qualified financial advisor for personalised guidance based on your specific circumstances.