Susan’s career has taken off and Paul has decided to take a career break, staying at home to look after their two young children. With Susan now the sole breadwinner in the household, the family is reliant on her income to fund their day-to-day needs, as well as the funding required for future aspirations.
Paul and Susan needed to ensure they could provide for themselves and their children in the event that either of them was to die or become critically ill. They also wanted to provide a good start for their children by funding their school and university fees.
Paul and Susan are considering the financial consequences if Susan was to die or become unable to work due to an illness. Is there sufficient life insurance, income protection and critical illness cover in place to repay loans and meet normal expenditure needs? What would the financial implications be if Paul was to die? Although Paul is not bringing an income into the household, he plays a valuable role in looking after the children so that Susan can focus on her career. How much would it cost for Susan to employ a nanny to look after the children and allow Susan to continue with her career?
After reviewing their pension arrangements with their Crowe Financial Planning Consultant, Paul and Susan enhanced their protection insurances and arranged additional life assurance, critical illness and income protection utilising a Family Income Benefit plan. As independent financial advisers we were able to source the best products and provide that additional financial support through a relatively low cost solution to cover the children until they complete their education.
Paul and Susan are keen to support their children through secondary education and on into university. They are considering how much capital they will require to fund school and university fees and how this could be generated in a tax efficient manner, using all available allowances, including those available to the children.
As Paul is not working and has no income he is a non-taxpayer, whereas Susan is a higher rate tax payer. With this disparity in their tax positions, they should be considering the most tax efficient way in which they hold their savings and ensuring that Paul’s allowances are maximised where possible and taxes are minimised.
We highlighted the benefits and advantageous tax reliefs of saving into pension plans and how these monies could be used to generate a tax efficient income stream in retirement.
We advised them on an appropriate investment strategy and structure to help meet the future cost of the children’s school and university fees using cashflow modelling. This is to demonstrate how much they needed to save, how these monies should be invested and that the expected cost of funding the fees was achievable and affordable.
We advised on a tax efficient savings and investment strategy to make use of all personal allowances and ensured that the overall tax efficiency of their planning was optimised.
We agreed to review their planning, objectives and strategy annually to ensure that their plan remained appropriate for their circumstances so that they could stay on track to meet their objectives.
Paul and Susan had peace of mind knowing that they would be financially secure and that their future plans would not be derailed by an unforeseen event.
They understood the actions that were required to fund the children’s education and were comfortable in the knowledge that, through stress testing possible scenarios using cashflow modelling, their objectives could be met and the funding was affordable and sustainable.
They now have a tax efficient savings strategy, making use of Paul’s non-tax payer status while he remained at home to look after the children. They made their money work harder for them by saving into pension plans and benefitting from Income Tax relief on their contributions.
Stage 1: Setting a foundation
Stage 2: Building a career and raising a family
Stage 3: Career peak and accumulating wealth
Stage 4: Focusing on retirement
Stage 5: Enjoying retirement and passing on wealth
Stage 6: Later life and legacy
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