Two years ago Mr & Mrs Smith, both aged 55, came to discuss with us their plans for retirement. They each held pensions built up over many years and wanted to know how their plans could be used for a sustainable income in retirement, and by what means this should be provided.
We identified their existing financial circumstances, when they planned to retire as well as their income needs in retirement. This covered not only pensions, but their investments, insurances, debts and home ownership situation.
In addition, we asked a series of risk profiling questions, aimed at understanding what level of investment risk Mr & Mrs Smith would be suited to and if this was reflected by their pensions. This led to a discussion regarding their preferences for taking an income in retirement, be it via drawdown or purchasing an annuity. They each indicated they did not want to have their income fixed and have no flexibility in the future.
We then analysed their existing pension plans referencing charges, penalties and any bonuses due. Mr & Mrs Smith had a medium attitude to risk, whereas their plans exposed them to a higher level of risk than they appreciated. Our investment team then created a portfolio more suitable to their risk profile consisting of equities, fixed interest and property.
It was only after gathering all of the above information that we were in a position to present our findings to Mr & Mrs Smith. Their options for retirement were discussed at length and it was agreed to move their existing funds to a plan which would facilitate taking an income through a type of drawdown plan. The portfolio would also match their risk profiles and minimise costs where possible.
Two years on, we continue to work with Mr & Mrs Smith. A dedicated adviser meets with them annually to reappraise their current financial situation. The suitability of their investments is assessed in relation to their attitude to risk so that we can ensure their goals for the future are met.