Can Retirement Be Closer Than You Think?
A Case Study with Rosbotham Finance
Written by David Rosbotham DipPFS | Financial Planner | Feb 24
Can retirement be closer than you think? This question became paramount when a married couple, immersed in their careers while neglecting their financial future, sought guidance from Rosbotham Finance. This case study takes a closer look at Rosbotham Finance's process for a couple who were seeking help for Retirement Planning.
Meet The Clients: The Facts
Husband & Wife
Age: Both 55
Employed: Yes in Switzerland (B permits)
Tax Resident: Switzerland since 2014
Swiss Property: 1.1m CHF (outstanding mortgage 750k)
UK Property: Valued at £2.2m (outstanding mortgage 250k)
2nd Pillar Pension: Today’s Value 430,000 CHF and 710,000 CHF
Pillar 3a: 70,000 CHF each
Other Investments:
Company Stock Options: 400,000 CHF
Cash Savings: 100,000 CHF
Children: Yes x2 (above 18 and in the UK)
Will – Not up to date
Power Of Attorney – No
From Busy Lives to Retirement Dreams: Understanding the Couple's Financial Situation
We conducted an introductory meeting; we call this Stage 1.
Note: During this meeting we try to gather as much information as possible; this includes some of 'the facts & figures' (highlighted above) but we also dive into details surrounding a client's current thoughts and feelings on their plans for retirement.
During our conversation, the couple gave us information about their current plans for retirement and what they thought were the right decisions to make regarding their Swiss pensions, repatriation and retirement age. They disclosed that over the past decade, their attention had been dedicated to advancing their professional careers and raising a family, leaving little time for a thorough assessment of their retirement prospects. In our discussion, they talked about the following key areas & objectives:
To continue working until the age of 65
To retire in the UK
To optimise tax efficiency by contributing to their Swiss Pensions through voluntary buybacks until 65
Take the annuity from their Swiss 2nd Pillar Pensions
To pay off their UK mortgage before retirement
To leave a legacy for their children, with hopes of minimising inheritance tax implications
Note: As is the case with many other couples, the answers to retirement-related questions often tend to be very generalised. Responses are frequently influenced by information gleaned from investment protocols, governmental sources, or peer advice and often do not consider all the unique aspects of their individual situation.
After the introduction we emailed a Scope of Advice to the clients which highlighted the Area of Advice we recommend for them, any fees involved, and information on the next steps and process. Based on the information provided, we advised that we could help them with Retirement Planning & Cashflow forecasting for a fixed fee.
Defining Retirement Goals: Client Objectives
The couple eagerly confirmed they wanted to proceed with our retirement planning service for a fixed fee so we set up a second meeting to start Stage 2, our in depth 'Discovery Session'.
Note: During Stage 2 we delve deeper into the topics we discussed in our introductory meeting. Prior to this meeting, we request that the clients provide us with all the relevant statements for existing pensions, investments and mortgages.
During the discovery meeting my inquiries delved deeper into the details. By asking precise, thought-provoking questions we unearthed instances where the clients lacked accurate technical information and analysis regarding their pensions and investments. Without this important information, the clients were blind to how particular scenarios would impact their overall retirement plan.
Here are some examples of the types of questions we asked during this meeting:
Have you evaluated the optimal method to access your Swiss Pension – Annuity vs. Lump sum, considering your goals and comfort level?
Are you aware of the three-year rule governing voluntary buybacks into your Swiss Pension?
Do you comprehend the significance of age 58 in Swiss employment, and the financial implications of continuing work beyond?
With significant equity tied up in your £2m UK property, have you considered the inheritance tax burden on your children?
Do you know the commencement dates for drawing down on each UK pension?
Have you estimated the cost of repatriation?
Here are some examples of the technical details we clarified with the couple:
An annuity from a pension provides a guaranteed income for life or a predetermined period in exchange for a lump sum investment
The RAV/Chomage offers personal advice to job seekers pre- and post-unemployment.
Pension drawdown allows access to pension savings whilst leaving the bulk of the fund invested.
At the end of our discovery meeting we decided that we needed to answer the following questions in order to complete the couple's retirement plan. These questions are quite typical of retirement planning clients:
Do we possess sufficient retirement funds?
How should we draw funds - Is it better to draw from our General Investment accounts or prioritise pension drawdowns?
Should we sell or rent our Swiss property, and what are the capital gains tax implications?
How much liquidity should we maintain?
Are there any overlooked aspects or potential pitfalls in our plan?
The Power of Visualisation: Cashflow Forecasting in Action
Once we gathered all the information we needed from the couple we were ready to move onto Stage 3 of our process, 'Cashflow Forecasting'.
Stage 3 of our process is a presentation where we bring to life your retirement plan through a cashflow forecasting system. Having a visual to understand when your pension income starts, and which asset to use first to fund your retirement is much more helpful than an adviser just telling you that you need to save X amount. Cashflow forecasting is a method that integrates personal data, pension forecasts, investments, income and expenses into various scenarios.
Before the meeting we inputted all the clients information into our cashflow system, this allowed us to maximise the time during our meeting. During the meeting we shared our screen with the clients so that they could see the cashflow forecasting system work in realtime. We inputted different scenarios, based on the clients questions from Stage 2, to show them how each financial decision could potentially impact their wealth in the short term & long term. The following are some examples of the scenarios we stimulated on the cashflow forecasting system:
What impact would accepting the annuity versus the lump sum have on the retirement plan
Is retirement at 60 a feasible option
How would redundancy before age 58 affect the plan
What if they retired at 60 but resided in Switzerland for two years, considering the unemployment benefit schemes
How resilient is the plan in the event of a market crash, exemplified by a simulated 2008-09 scenario at age 65
Picture shows a snapshot of our cashflow system, and two scenarios we stimulated; see how adjusting annual net income affects how long retirement pot lasts.
Redefining Retirement: Discovering Early Retirement Possibilities
The final stage of our process was to present the new financial plan with a step by step guide on what to do on the run up to retirement. This included pension contributions, repatriation advice and how to invest in the short-term. For this couple we presented a comprehensive plan that could facilitate retirement at age 60 with an £80,000 annual net income, that aligned with their desired lifestyle.
This revelation shattered the couples misconception that retirement could only commence at 65, emphasising the significance of early planning in achieving financial security.
Insights and Reflections: Learnings from the Case Study Experience
In conclusion, through meticulous planning and informed decision-making, Rosbotham Finance empowered this couple to envisage a retirement closer than they'd ever imagined, emphasising the importance of proactive financial planning for a secure future.
“I can’t believe we would have continued to work until age 65! And missed out on 5 extra years of spending more time with our family”
I wonder how many people just assume they have to work until 65 and have never considered retirement planning to assess if early retirement is possible? During this case study we that we have unveiled the power of proactive financial planning and the potential for retirement dreams to become a reality sooner than expected.