Kevin and Ali felt very lucky. They couldn’t believe it when every one of their lottery numbers came in and they were £3,886,429 better off. They had been talking about planning their future together, but it was tough. Property prices in central Manchester had increased drastically and they were struggling to make the numbers add up. They had almost resigned themselves to renting for life.
Things were different now, of course – the first thing they did was to put down a deposit on a 4-bed penthouse costing them £775,000.
Kevin worked as a computer programmer. He was doing well and was a higher rate taxpayer. Ali worked as a dancer in musical theatre and, as you would imagine, his earnings were more problematic. When he wasn’t dancing, he often volunteered at a local hostel, supporting homeless people in need of a bed for the night and a hot meal. That wasn’t really Kevin’s thing though, so when Ali was volunteering Kevin was often cooking. They were vegetarians and Manchester’s large Chinese community meant that he had access to a vast range of genuine oriental cooking ingredients.
On the one hand, they felt they had enough money to do these things, but then again, they could be fooling themselves.
Reasons for seeking advice
Now that they had this money it gave them the freedom to plan their life how they wanted to. They had spoken about marriage in the past and now have a date set.
Kevin enjoyed his work but was considering moving to a four-day week if it was feasible. It wouldn’t have too much of an impact on his job. Ali’s plans were more drastic. He had been worrying about what to do but with this new money available, he had a plan. He would self-finance a two-year master’s degree in theatre management.
Before that, they wanted to travel. They were conscious of their carbon footprint, so decided on return flights to and from Singapore, from where they would complete a loop of South East Asia by boat and train before flying back in nine months’ time. Kevin worked for a very progressive employer who allowed for unpaid sabbaticals of this type.
Looking further into the future, they would love to adopt a child, maybe providing a loving home for an orphan. Ali regularly attended Amnesty International meetings so was well aware of the perilous lives faced by far too many kids in the world.
On the one hand, they felt they had enough money to do these things, but then again, they could be fooling themselves. Their friends were our clients and recommended they talk to us as we had been a great help to them.
How we helped
After a detailed exploration of their hopes and dreams, we encouraged them to put some figures and timescales to each as a building block from which we were able to map out a plan. We agreed on the details, added in a degree of contingency, and used this to put together a detailed, long-term plan.
We also stress-tested this to account for things not going exactly as they intended. The great news was, that even with the most pessimistic approach, they should be able to fulfil all of their dreams, even allowing for Ali to become a full-time dad if he wanted.
From then, we put a series of carefully tailored pensions and investments in place. With Kevin being a higher rate taxpayer, it made sense to push as much money into a pension as possible. Due to the tax breaks that pensions offer this allowed him to mitigate a large amount of his annual income tax bill.
For Ali, being a non-taxpayer, we took advantage of his particular tax status. For example, carefully investing some of their money in specialist bond investments which were taxed for Income Tax rather than Capital Gains Tax, it meant using up his annual Personal Allowance each year.
We also invested in managed investment portfolios for them both, enabling us to make full use of their annual Capital Gains Tax allowances, as well as feed money into ISAs for them each year. All of these investment wrappers contained carefully filtered, ethical investment portfolios, which was equally as important to them.
This series of investments worked very well and the continued long-term growth they experienced kept adding to their financial security. They put a reasonable amount of cash aside to cover their overseas trip and wedding and invested most of their remaining money with us, which they started to draw on alongside Kevin’s income once they returned to the UK.
What they really liked
Three years on from when they first came to us, they fulfilled the last, and most important, of their goals. It took a few months of planning and paperwork to work through, but eventually, they adopted a one-year-old girl called Olive.
They hadn’t realised quite how good it was to become doting dads, and they loved seeing Olive grow even if she did claim to be a better dancer than Daddy Ali and occasionally made Daddy Kevin frown when she spat out his latest culinary creation.