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- Turning savings into a family plan
After years of building up savings and pensions, Emma and James wanted to make sure their money was working towards the things that mattered most.
When Emma and James came to us, they were in a strong financial position. They were married with a young son, had a good household income and had built up savings and pensions over the course of their careers. James was the significantly higher earner, while Emma had previously received two Critical Illness payouts following a period of ill health, one through a workplace scheme and another from a personal policy.
Thankfully, Emma made a full recovery, but they were unsure what to do with the money she had received. With no immediate need for it, the funds had gradually accumulated across several savings accounts.
It was only when Emma began receiving letters from HMRC about tax due on the interest that they realised the money could be restructured more tax efficiently. Until then, she had not appreciated that savings interest could become taxable.
Rather than looking at the savings in isolation, Emma and James wanted to understand how everything fitted together.
Their son’s future education was important to them, as was making sure they remained on course for the retirement they wanted. They also wanted to know whether keeping such a large amount in cash was still the right approach when they were unlikely to need most of it for several years.
As first-time investors, however, they did not want to move everything into investments and lose the reassurance that accessible savings provided.
We created a financial plan that mapped out their future spending and longer-term goals. From there, we looked at how much they should keep readily available, both as an emergency fund and for any shorter-term spending needs. This allowed us to agree an appropriate level of cash before considering what to do with the remaining money.
Our cashflow modelling also highlighted a potential vulnerability. As James was the main earner, the family could face a significant financial shortfall if he became unable to work. We therefore arranged income protection to give them greater financial security.
We explained how inflation could gradually reduce the spending power of cash over time and built investment portfolios around when they might need the money. The surplus capital was then invested tax efficiently using allowances available to both Emma and James, alongside contributions to their son’s Junior ISA.
Once their cash needs, protection and investments had been considered, we turned our attention to their pensions. We reviewed the different pots they had accumulated and recommended consolidating the majority, while adjusting the investments within those that were better left where they were.
Because retirement remained some way off, their pension investments could take a higher level of risk than the portfolios holding money they might need sooner.
The review also uncovered an issue James had not been aware of. His income meant he had been affected by the tapered annual allowance and had exceeded his pension allowance for several years. We helped address the previous position and structured future contributions more appropriately.
Emma and James now have a clearer understanding of what their money is there to achieve. They still have cash available when they need it, but their longer-term savings and pensions are structured around their family’s future rather than simply sitting across different accounts.
Most importantly, their plan now considers their son’s education, their retirement and the financial risks they could face along the way, giving them greater confidence in the decisions they make from here.
Our clients’ names have been changed to protect their identities.
This case study is intended as illustrative purposes only, it does not constitute individual advice and should not be used to inform financial decisions.
They are based upon our understanding (at the time of advice) of current law, HM Revenue and Custom's practice, tax rates and exemptions, which are subject to change.
A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless the plan has a protected pension age). The value of your investments (and any income from them) can go down as well as up which would have an impact on the level of pension benefits available.
The Financial Conduct Authority (FCA) does not regulate cash flow planning, estate planning, tax or trust advice.