Credencis Case Studies

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Case Study 1

Cashflow forecasting puts our client’s pension planning back on track

Case Study 2

Turning our client’s underperforming investments into lower-cost, better-performing alternatives

Case Study 3

Cashflow modelling and pension consolidation open a clearer path to our client’s retirement

Case Study 4

Cashflow forecasting allows for sustainable pension drawdown

Case Study 5

A client’s financial check-up leads to early retirement

Case Study 6

How gifting a living inheritance reduced our client’s Inheritance Tax liability

Case Study 1

Cashflow forecasting puts our client’s pension planning back on track

Our client was aged 53 when he came to us to discuss his retirement plans. We discovered that he wasn’t on track to meet his chosen retirement date, but we were able to work with him and his wife to put them back on track.

It’s never too early to start thinking about your retirement. Our client – married, with a well-paid job and grown-up children – had always planned to retire at 65 but admitted he hadn’t given much thought to how he would make that goal a reality.

He felt that 53 was the right time to start thinking seriously about his retirement plans, and so he came to us. Just as we would do with you, we took the time to get to know him and his finances – his circumstances, background, and his attitude to risk – before talking him through cashflow forecasting.

He felt that 53 was the right time to start thinking seriously about his retirement plans, and so he came to us. Just as we would do with you, we took the time to get to know him and his finances – his circumstances, background, and his attitude to risk – before talking him through cashflow forecasting.

We helped him complete an income and expenditure form which confirmed his expected retirement date of 65 wasn’t currently feasible. This came as a massive shock and a worry, both for him and his wife.

Having worked with many similar clients, we were able to provide the reassurance that he needed. As we began to look more carefully through the figures, we calculated the disposable income that he and his wife had as a couple, per month. This was another shock for our client.

Sitting down and mapping out exactly where their money was going was something the couple hadn’t done in a long time. It made the pair approach their finances in a new way. The couple had £1,000 disposable income between them, per month. By advising that they put half of that (£500) into a pension for the next 12 years, and assuming 5% growth, we were able to put a plan in place that should see our client retire at their desired retirement age of 65.

The pension at that point will provide an income of £10,000 per year, rising by 2% annually to combat inflation. In conjunction with their State Pension and sizeable ISA investments held elsewhere, the client had the confidence and peace of mind to start planning their future.

Avoiding a potential pension shortfall

By paying into a pension for many years without calculating the amount that his current contributions would provide, our client was jeopardising the retirement he wanted. At the same time, he was spending money without being sure where it was going and had greatly underestimated the disposable income he had.
It’s a position many people find themselves in.

By using the cashflow modelling tools at our disposal, we were able to confirm that our client’s current plans weren’t achievable if he carried on as he was and that a change was required. Also, by taking the time to get to know our client and his wife, we were able to put a plan in place, showing the couple exactly how much they were spending, where costs could be cut, and where increased pension contributions would come from.

This has had a genuine and real-life impact on our client whose retirement dreams became an achievable goal and, in a few years, will become a reality.

We now check in with our client regularly via annual reviews to keep him up to date, ensuring his pension remains on target and performing at the required level to see him retire at 65. We could do the same for you.

Have questions? We can help.

Many people find themselves in the same position as our client, so if you think you could benefit from having a retirement plan in place, please contact us. 

Please note

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. Workplace pensions are regulated by The Pension Regulator.

Case Study 2

Turning our client’s underperforming investments into lower-cost, better-performing alternatives

We were contacted by a 54-year-old lady who was confused about her pensions. She had been paying into her current plan for six years. The fund performance was poor, and she was also losing large amounts of money annually through excessive fees and ongoing charges. The ongoing charge attached to the policy was 2.5% annually, comprising 1% for the product, 1% for the fund manager, and 0.5% in an adviser fee, even though she hadn’t had a review in the six years that she had held the plan.

With a pension pot of approximately £100,000, this amounted to £2,500 a year being lost in charges. And, as she wasn’t getting any reviews, she had no idea of the fund’s performance. She was also paying for the additional benefit of Guaranteed Annuity Rates as part of a hybrid product that she didn’t understand or need. She had no intention of taking an annuity at retirement and therefore the rates were an irrelevant additional expense.

The lady approached us for help in better understanding her pension and we began, just as we would do with you, by completing a thorough Fact Find. We take the time to look into the personal circumstances of all our clients, including their finances and their attitude to risk.

We found out when the lady was hoping to retire and, through the completion of a risk questionnaire, her attitude to risk. It quickly transpired that her current pension was invested in funds that didn’t align with her risk appetite.The lady became our client and we promptly switched her to another provider.
After an initial fee of 3%, the new contract incorporated an annual management charge of 1.27%, compared to the 2.5% she had been paying. The new charge comprised 0.3% for the product, 0.22% for the fund manager, and 0.75% as an ongoing adviser fee, but she now receives regular annual reviews.

We were able to switch our client into a lower risk fund, much more aligned to her attitude to risk, and because the original fund performance was so poor, the lower risk fund is actually performing better.

Lower fees help our client’s money work for them

Our client spent six years invested in a poorly performing fund that wasn’t aligned to her risk profile. She was paying excessive charges for products she didn’t need and wasn’t receiving regular reviews, so she had no way of knowing whether she was on track to meet her retirement goals. The result was that she was confused and in need of a second opinion. By coming to us, she was able to discuss her long-term goals, the level of risk she was willing to take, and her concerns about her current provider.

By switching to a new provider on a more suitable platform with more fund choice, we were able to recommend a fund that better matched our client’s attitude to risk, whilst also performing better than her previous, higher-risk fund. Our client is no longer paying for the Guaranteed Annuity Rate hybrid product she didn’t understand or need and is paying lower charges whilst receiving regular reviews which give her peace of mind that her investments are on track. Pensions and investments can be complicated and it’s not uncommon for people to find themselves paying exorbitant fees for unsuitable plans that they don’t fully understand.

Have questions? We can help.

If you think you could benefit from a financial review and discussion of your long-term retirement plans, please contact us.

Please note

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. Workplace pensions are regulated by The Pension Regulator.

Case Study 3

Cashflow modelling and pension consolidation open a clearer path to our client’s retirement

Our client was 55 and held multiple pensions with various providers. The age and spread of these schemes meant that he was confused about what provision he had made, with no idea whether he would have a big enough pension pot when he reached retirement.  The man came to us because he wanted to start taking an interest in his pension again. We were able to locate all the schemes he held – five in all – and discuss the benefits and drawbacks of consolidation (transferring all the plans into one scheme).

Once we knew the size of his pension pot and had a firmer grasp on charges and potential future growth, we were able to produce a cashflow forecast to help our client understand exactly when he could afford to retire. It turned out to be sooner than he thought.

The man had held a number of different positions in his career, within the same sector, and had amassed several workplace pensions, some of which were many years old. Older pensions can often have higher charges, as was the case here.

Other problems included:

Z

The performance was mediocre

Z

The choice of funds was small

Z

Several funds were closed to new business, meaning that he wasn’t able to pay in any further contributions.

As his pensions were “not doing a lot”, the client had lost interest in them. Just as we would with you, we looked closely at his individual circumstances before explaining the benefits of consolidation, a great option for the client in this case.

By transferring all the pensions he held into one pot we were able to place the client’s entire pension fund into one scheme with lower charges and more fund options. Having just the one value made it much easier for the client to envisage the size of his pot and the prospect of his future retirement became more real. We were able to get the client’s money working for him again, producing a cashflow forecast to help him further understand where his money was going, how much he could hope to retire on at his current rate, and the point at which he could feasibly retire.

We were able to isolate a portion of his income as disposable, upping his pension contributions and significantly reducing the time until he began to draw a pension. With a definite goal to aim for and one that’s closer at hand than he originally thought, the ongoing adviser charge he pays is used to maintain engagement through regular reviews, allowing him to check in on the performance of his fund and ensure he’s still on target for his new retirement date.

Consolidation helped our client take an interest in their finances again

Pension consolidation can have drawbacks, such as tax implications when you come to draw benefits, and transfer charges that have to be paid when moving your fund. By knowing your individual circumstances and your plans for retirement, we can help you decide if it’s right for you.

The biggest benefit is having all your pensions in one place. You can see exactly how much you have, track your fund’s performance, and use that knowledge to budget for retirement. Newer schemes often have lower charges than their older counterparts, with more fund choice and online portals that you can use to track the progress of your investment yourself, helping you reengage with your finances and your retirement planning.

It’s easy to lose track of your pension provisions and, if you have, you’re not alone. Just as we did for the above client, we can help you locate, organise, and manage your various pension pots, giving you a clearer view of your current situation and a clearer path to retirement.

Have questions? We can help.

If you think you could benefit from a pension review and a discussion about your retirement plans, please contact us.

Please note

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. Workplace pensions are regulated by The Pension Regulator.

Case Study 4

Cashflow forecasting allows for sustainable pension drawdown

A man in his early 60s came to us as he had recently retired. Having opted for flexible drawdown, he was worried he was taking too much income from his pot and at risk of running out of money in the future.

Our client was right to be concerned. He was taking too much and the levels of income he was drawing down weren’t sustainable. Having worked with many clients in a similar situation, we were able to put a plan in place and provide reassurance.

The client was aged 63, had been retired for three years, and had a pot in drawdown of approximately £200,000. He was taking nearly £15,000 a year in income, more than 7%, and almost double the FCA-recommended amount of 4% (in this case, £8,000).

By working with the client to produce a cashflow model we were able to look at how his current funds were performing, how aligned they were to his risk profile, and give a much clearer idea of a sustainable amount of income that could be drawn down.

By changing funds into ones that better matched his attitude to risk we were able to increase his annual returns and he is currently taking the same level of annual income, but it is now sustainable. His investment is performing better – seeing 10-15% growth annually – which means his fund is maintaining, or even going up, even as he takes a higher level of income.

You’ll no doubt have heard from finance professionals that past performance is no guarantee of future success, but our client is currently “having his cake and eating it”. Speaking to us gave our client peace of mind and also averted a large pension shortfall in the future, allowing him to live his desired retirement lifestyle in confidence.

Pension Freedoms give greater flexibility, but only if managed correctly

Pension Freedoms, introduced in 2015, give investors increased options at retirement but many of the so-called ‘flexible’ options put a greater emphasis on the individual to budget responsibly for the duration of their retirement.

Keeping track of your income withdrawals and the size of your remaining pot means constant checking-in and budgeting. It can be a complicated process, especially through periods of economic unrest when you’ll find you need to sell more units to provide the same level of income, thereby reducing your pot quicker than you might have anticipated.

Whilst it can be tricky, we are there to help. We can use our cashflow modelling tools to calculate the level of income that is sustainable for you and if you seek advice early enough, we might be able to help you increase the size of your pot pre-retirement, upping the level of income you receive.

Have questions? We can help.

If you think you could benefit from a review of your current pension provision or if you are already retired and worried about the level of income you’re drawing down, please contact us.

Please note

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. Workplace pensions are regulated by The Pension Regulator.

Case Study 5

A client’s financial check-up leads to early retirement

Our client was aged 60 when he came to us with concerns about his pension planning. He wanted to know when he might be able to retire but had no plan in place, and very little idea of his current provisions.

Using cashflow forecasting, we were able to give our client the great news that he was in better shape than he thought and that he could retire almost right away! By starting a pension early in his career our client had amassed a pension fund in the region of £200,000.

As we would do with you, we began by using an income and expenditure form to get to know our client. By understanding his current finances and his desired standard of living in the future we were able to put a retirement plan in place that matched his aspirations.

With other, non-pension investments to supplement his income, our client was looking to receive around £10,000 a year to maintain his current lifestyle. This included £5,000 for fixed expenses and an additional £5,000 for discretional expenses to include, amongst other things, an annual holiday.

The retirement plan we put in place for our client allowed him to take this amount from his pension, by placing him in a hybrid product that incorporated a regular annuity and a drawdown element. The regular annuity amount now covers our client’s fixed expenses and the drawdown amount can be managed to cover discretionary expenses, as and when they occur, up to the £5,000 amount set out in the plan.

The hybrid product was available with the scheme provider our client already had so no transferring or switching of funds was required. The pension fund was already in place too – all our client needed was guidance and the confidence to take the plunge.

Cashflow modelling gives our client confidence and peace of mind

As we would do with you, when our client approached us, we were able to sit down with him and use our simple cashflow modelling tools to help make sense of the often complicated jumble of investments and pensions he held. Calculating the true value of your financial products and matching them to an income and expenditure model based on your real-life spending, means we can develop a bespoke financial plan that exactly fits your current circumstances and future needs.

The benefit to the client of our approach was, in this case, instant. With the confidence and peace of mind that came from having a clear grasp on his finances, our client was able to hand his notice in immediately and retire as soon as the notice period was up. Our plan laid out the expenditure that he could afford, and it allowed him to live his desired lifestyle in retirement, immediately.  We can do the same for you.

If you have a pension fund that you haven’t checked in on for a while or a vague retirement plan but without the knowledge of your pension values to be sure whether you can make it a reality, we can help you put a financial plan in place.

Have questions? We can help.

If you think you could benefit from a financial review and cashflow forecast, please contact us.

Please note

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. Workplace pensions are regulated by The Pension Regulator.

Case Study 6

How gifting a living inheritance reduced our client’s Inheritance Tax liability

Our long-standing client was aged 78. She was beginning to think about the money she would leave to her loved ones when she was gone and was especially concerned about the prospect of leaving them with a large Inheritance Tax (IHT) bill.

We were able to help her navigate complex HMRC gifting rules, giving her the confidence to provide her family with a living inheritance, whilst reducing the IHT liability once she passed away.

Through the so-called ‘active’ phase of her retirement, our client was ready to start thinking about how she would manage her financial affairs in later life, including balancing the cost of later life care and unexpected future expenditure with her desire to not leave too much behind.

We engaged our client in cashflow analysis, completing income and expenditure calculations, and confirmed that even factoring in the unexpected, she could afford to give a portion of her estate away through various forms of IHT-exempt gifting. The value of the client’s estate was significant. For the 2020/21 tax year, everyone is entitled to leave up to £325,000 (plus the new ‘main residence’ band of £175,000) giving a total allowance of £500,000 per person.

You can gift up to £3,000 a year tax-free, an amount known as the Annual Exemption.

You can also make exempted gifts using the normal expenditure out of income exemption. For this to apply you must be able to confirm the gifted amount forms part of your normal expenditure, that it was made out of income and that you were able to make the gift and still be left with enough income to maintain your normal standard of living.

We were able to help our client make use of the annual exemption, removing £3,000 a year from the value of her estate, as well as making gifts under the normal income out of expenditure rules from her disposable income. This allowed our client to pass on a living inheritance to her loved ones, it gave her the confidence that she could afford to do it, and the peace of mind that her liability to IHT was greatly reduced at the same time.

Gifting money can be tax-efficient

Managing your estate to ensure that you can live your retirement in the manner you choose, and without running the risk of having a financial shortfall, or conversely, without leaving too much, thereby leaving your loved ones with a large IHT liability, can be a complicated process.

We were able to help our client, as we would you, by highlighting the things that she could do now and throughout her retirement, to limit the impact of IHT on her loved ones. Not only could we explain the sometimes complex rules that govern IHT and giving away money in the form of gifts, but we were also able to give her the confidence and peace of mind that she could do so without decreasing her quality of life.

We can do the same for you.

If you have a large estate and worry about the impact of IHT on your loved ones, we can help you work out a retirement plan that manages your wealth, passing it on to the next generation in a tax-efficient way.

Have questions? We can help.

If you think you could benefit from a financial review and our wealth of estate planning experience, please contact us.

Please note

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. Workplace pensions are regulated by The Pension Regulator.

Information is provided as a guide and based on our current understanding of taxation legislation and regulations. Any levels and bases of reliefs from taxation are subject to change.

The case study and the information provided may not address your particular circumstances, objectives, and attitude towards risk.

It is not (and is not intended to be) advice, recommendation, representation, endorsement or arrangement by The Pension Drawdown Company or an invitation to invest or an offer to buy, sell, underwrite or subscribe for any particular investment.

We recommend that you take appropriate independent advice from one of our qualified advisers before making any investment decision.