Practical Case Studies - Case Study 3

The background. George Elmer runs his own wholesale greengrocery business. He is unmarried and has no intention of marrying. His younger sister, who is separated from her husband, and her daughter, live with him and his sister helps him with the business website-keeping. George is now 46 and starting to think about the future and retirement. He is doing well with his business and in the past two years the amount of tax he has had to pay has risen sharply. He has a couple of life insurance policies he took out many years ago, but thinks he should now be starting a personal pension plan. He would also like to make some provision for his sister and her daughter, because her husband is a ne'er-do-well whom George reckons will never support her.

The advice. Well, Mr Elmer, I think your decision to take out a personal pension plan is a very sensible one. After all, thanks to the tax relief you will get, the taxman will be paying as much as half the premium. And the benefits you can secure on retirement are well above those you would get through any other type of savings policy. From what you have said it looks as though you are entitled to put as much as £12,200 a year into a plan, and you can, I imagine, well afford this since the net cost to you will only be about £1720. Now I would suggest that you put the bulk of this into a regular premium plan with a good with-profit office. You will have the guarantee of a basic minimum pension and the knowledge that, as bonuses are declared, the guaranteed pension is steadily increasing. I would suggest an annual contribution of £1800.

This leaves another £1400 a year, which I would advocate putting on a regular premium basis into unit-linked funds. The reason is that investments fluctuate in price and each year there is likely to be an opportunity for you to acquire units at a price that gives you a good chance of making a substantial gain. The type of policy I have in mind also allows you to switch units from one fund to another. What I would suggest is that each year when you have decided how much you can invest (if your earnings go up it may be more than £1400) we can review the position and decide on the allocation of the current year's premium and any change in the funds your cash is already invested in. I think this method offers the prospect of making substantial gains over the years to retirement.


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Practical Case Studies - Case Study 2

The background. Ella Groves, 36, is divorced and lives with her two children in a flat bought with the half-share of the money she got when she and her husband sold their former home. She also receives from him under a court agreement an income of £12,500 a year. Her own part-time work as a freelance translator brings in another £12,500 a year, but she will not be able to increase this much until the children are both at school and she has more time for her work. She doesn't reckon that she needs any life insurance protection for the children - if she dies her former husband will take... see: Practical Case Studies - Case Study 2


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