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The Life of Brian Riley, Phase 6

A

1. Previous advice (not including that given by the other advisers) contained enough flexibility to cope with the changes in Brian's lifestyle.

2. Brian's life cover is far less than that which could have been recommended and only represents 3 years salary (or 1 years total income). No use has been made of Term Assurance.

B

1. Errors and Inconsistencies (Actual and Potential)

   1. Mortgage is given as £75,000 but Endowment life cover is only £60,000.

   2. Last house move is given as 2/3 years ago but the Endowment has been in force for 11 years.

   3. Company shareholdings are not given but dividend income is shown as £66,000 from a total investment portfolio of £136,000. A rate of nearly 50% is unlikely.

   4. National Savings Certificate holdings are shown as £20,000. This may be over a number of Issues but the maximum holding per Issue per person is £15,000.

   5. Additional income of £700 is shown but there is no source given.

   6. Some pension provision has been made through RACs but the selected retirement date is given as 50 and under RAC rules the minimum is 60 unless in a special occupation or in serious ill health.

   7. The potential estates shown do not match the division of assets or the joint ownership of the home (joint tenancy or tenants in common ?)

   8. Judith's proposed retirement date is earlier than would normally be allowed.

   9. Only Judith appears to have effected a will, although they have the same solicitor.

   10. There is a conflict of opinion on the question of ethical investment.

2. Questions to Clarify

   • Brian, when do you anticipate retirement? Do you plan to gradually retire or take all your benefits at once?

   • Could you please confirm your individual shareholdings in Greenpipes Ltd?

   • Where does the extra £700 additional income come from?

   • Did you increase your mortgage when you moved house 3 years ago?

   • Do you have any other life assurance to cover the difference between your mortgage of £75,000 and the endowment Sum Assured of £60,000?

   • National Savings Certificates are held individually; please let me know how the £15,000 is divided.

   • Is your house held in joint names?

   • Have you both made wills?

   • What are the basic bequests in each will?

   • When were the wills last updated?

   • Of the £250,000 in pension funds, how much is in RACs and how much in PPPs?

   • Have you made any arrangements to contract out of S2P?

   • From which of the investments does the investment income relate to?

   • Why did you invest in an offshore investment?

   • Was the Bank loan/overdraft taken out for a specific purpose?

   • Judith, can you let me know the source and reason for the liability of £3,000?

   • Judith, was there a specific reason for taking out the Endowment with Jersey Life?

   • Is the West Country Mutual whole life policy assigned against your mortgage loan?

   • Brian, if you retire at 50 what level of income would you consider sufficient?

   • Judith, have you got a copy of your Pension Scheme booklet so that I can check the early retirement provisions?

   The above are only examples of the types of further questions which would need to be clarified. There are many other equally valid questions which could be asked.

C

1. The current Fund of £250,000 will grow between now and age 50 but the level of income it could provide will depend on annuity rates at the time. However the income is unlikely to be close to the level of salary being drawn.

2. Brian, with his fellow Directors, could set up an Occupational Pension Scheme or Group Personal Pension. To contain costs this would probably be on a Money Purchase basis. They must already have designated a stakeholder scheme for the employees as no other scheme is available to them.

3. Alternatively, the Directors could set up individual Executive Pension Plans for themselves

4. Any Occupational arrangement for Brian should be written to allow Accelerated Accrual although this will only result in a final fraction of 9/30 if he really intends to retire at age 50.

5. He should investigate Phased Retirement and/or Drawdown facilities under his current arrangements and, possibly, consider combining holdings.

D

1. Based on the information given, Judith will receive a pension worth less than 1/3 of her final salary. Also she will not be able to take her pension benefits at 47, as seems to be intimated.

2. If she considers this inadequate she will need to effect an AVC and/or FSAVC and/or stakeholder plan in order to boost her pension. The limit is 15% of remuneration including any main scheme employee contributions; details of the latter will need to be confirmed.

3. Her investment income could be used to fund contributions of up to £3,600 p.a. to a stakeholder pension or alternatively it could be re-invested in investments that could be used to subsidise income in the future.

REMEMBER You should not use any information contained on this page as the basis of any action until you have discussed matters with your financial adviser.