Case Studies

In The Sandwich

  1. case study -
  2. In The Sandwich -

Tom and Jane were friends of a member of a networking group to which we belong. The member was conscious that a recurring theme in their social gatherings was the combined financial and time pressure that Tom and Jane felt under, and so she recommended that they have an exploratory meeting with us, which we held without cost or obligation them at their home one evening.

This couple were in their mid-40s, and both worked full-time in demanding roles. With two children approaching secondary school age and a busy schedule of activities, they had their hands full outside work. In addition, Jane had lost her father recently, and it had become clear that her mother would need to move into a residential care home in the near future. As an only child, the onus was on Jane to devote as much time as she could to her mum, both emotionally and from a practical perspective given that there was a diagnosis of dementia and Jane held Lasting Power of Attorney.

While both clearly intelligent and capable people with a substantial level of disposable income that they could commit to financial planning, Tom and Jane were open in admitting that they lacked the time and dedication to focus on their financial planning.

The initial meeting was wide-ranging, and we identified three key areas where by working together we could make an important contribution to their lives:

  •  Pensions – They both belonged to workplace pension schemes, but due to time pressures had drifted into default contribution rates and investment strategies. Their ideal scenario would be to retire at 60, but they had no idea of the extent to which they were on track to achieve this, or whether the funds they were invested in were suitable for their own risk profile and time horizon. Using lifetime cashflow modelling, we estimated the shortfall in their combined monthly pension funding, and given that only one of them was a higher rate taxpayer, recommended that they should make the increased contribution in order to benefit from the additional tax relief.

 

  •  Protection – Protection – We checked the protection provisions of both Tom and Jane’s employee benefit packages, and found that these were restricted to Death in Service (ie life assurance) cover only. We compared this against both their capital needs (paying off the mortgage) and income needs (eg replacing lost income and childcare costs) should anything happen to either of them. As a friend had also been diagnosed with cancer, the couple were keen to explore the costs of both critical illness cover and private medical insurance. Having identified how much of their household budget they could commit to protection, Tom and Jane were then able to select a range of benefits that gave them peace of mind that the family could cope financially whatever may arise in the future.

  •  Long Term Care – Jane was naturally anxious that her mother would settle in the new environment of a care home.Having found one that her mother enjoyed during a trial stay, Jane was keen for her to remain there on a permanent basis, but was concerned about the cost and whether if she and Tom could afford ‘third party top ups’ if her mum’s resources ran out. Working together, we calculated the shortfall between her mother’s pension income and Attendance Allowance and the care home fees, which enabled us to identify that her mother’s capital (in terms of the value of her house and savings) would be exhausted within 4 years. Jane felt there was a strong chance that her mother would live beyond then, and was worried that at that point she may have to undergo an unsettling move to a local authority funded home. We investigated a number of options, including whether to rent out instead of selling her mother’s home, but eventually recommended an immediate needs annuity, which in this case was able to guarantee that the shortfall would be paid tax-free to the care home for the full duration of Jane’s mother’s life.

We have an annual review meeting with Tom and Jane, and while life ‘in the sandwich’ caring for both children and parents remains hectic and challenging, they feel like a weight has been lifted from their minds by making a conscious decision to have a full financial review at this stage in life.

We meet Ian face-to-face twice-yearly to review both recent performance and his needs going forwards. We are also often in touch between these times by phone or email as Ian has online access to his drawdown plan, and as a ‘hands on’ individual is keen to run thoughts by us, which we welcome.

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