Mr & Mr Y

Situation

Mr & Mr Y are in their early 30’s and married with one child. They approached us with the following concerns:

• They both have jobs with salaries of around £35,000. They are debt free other than their mortgage, but don’t know what to do with their surplus income. Going forwards they expect their salaries to increase.
• They are both enrolled in their company pensions but are unsure whether they are paying in enough.
• They want to ensure that their son would be provided for in the event of a tragedy.
• Ideally they would like to save so that they can help contribute towards their Son’s University fees (if he decides to go), or towards the deposit for his first house.

Outcome

As with most cases we needed to establish the current position for Mr & Mr Y which involved a full income and expenditure analysis so we could gauge income, necessary expenditure and what is affordable to invest.

We analysed risk for both parties to assess what types of investments were suitable.

Our recommendations and priority list were as follows:

• Neither party had suitable protection in place. Both of their employers would pay out a multiple of their salary in the event of death. But both parties requirement was that in the event of death or critical illness, they would want the other to not have to work, certainly until their son was aged 18. Therefore we calculated necessary expenditure, mortgage, and school fees for the period up until aged 18. We deducted the death in service offered from this and recommended joint policies that ensured they had suitable protection.
• We recommended that both parties put Wills in place to ensure their wishes particularly surrounding their son would be followed in the event of death.
• Their employers paid the minimum level of contributions required into their pensions. We used cashflow modelling to give an idea of what their financial future might look like, and we made recommendations that in this case they should set up a private pension each and start making contributions to this. We recommended amounts that were affordable and in specific funds. The amount could be increased over time.
• We looked at multiple routes for the saving for their son and in this case deemed a Stocks and Shares ISA to be the most suitable. With a Stocks & Shares ISA each party gets a £20,000 (2020/2021) annual allowance, and they had utilised none of this. The benefit of the ISA is that the monies are invested in the markets and will continue to grow, but unlike many other types of investments, the profits are tax free. When they are ready to give their son the money for fees/deposit they could withdraw this, but any additional monies which had been accumulated over the years due to growth or increased savings, could be left in the ISA for further growth. This could then be used to supplement retirement or to fund other purchases when required.

Now that the polices are in place, we continue to review these on a regular basis to ensure they are performing appropriately and continue to meet their needs. We can continue to adjust the cashflow model as their investments change over time. As their salaries increase we can adjust contribution amounts too to ensure they can continue to work towards achieving their financial goals.

If you can identify with this situation and would like to get some impartial advice, please get in touch.