1000 Word Financial Plan

By FMB on 

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Sometimes we have to put together case studies for competitions and awards. It's hard to describe what we do and just how powerful it can be, but in this abridged version of a financial plan you can begin to see how useful working with a Financial Planner can be.

Here we have a fictional scenario, albeit a rare one with us not being based in London! Rupert who is in the fortunate position of having considerable assets, has asked us for some advice!

Roger Jackson, who is a Certified and Chartered Financial Planner and Jon Palser who is a Fellow of the Personal Finance Society, collaborated on this scenario and the best way to proceed for "Rupert". It was really good for them to have such a  complex scenario to mull over and it really got them flexing their financial planning muscles.


Rupert Ball is 45 and a smoker. He is recently divorced from his second wife Marianne and the details are now all in place regarding the settlement. He has two children from his second marriage to Marianne; John aged 3 and Sylvia aged 5. He also has 3 children from his first marriage; now aged 18, 20 and 21 who are all in full time employment and not financially dependent on him. Rupert works as a city banker in London and earns £120,000 gross pa plus bonuses averaging £500,000. His employer has a very generous pension scheme to which he also contributes 10% of his basic salary pa. His employer also provides private medical insurance (for Rupert only P11D of £2,000) and income replacement cover at 100% of his salary for six months and 50% thereafter. Rupert lives in a flat in Kensington which he purchased with cash after his divorce, now valued at £2 million. Now that the divorce settlement has been made Rupert’s remaining assets are as follows:

• £1.2 million cash on deposit earning 4% gross interest

• £2 million in a mixture of unit trusts and OEICs investing in 100% international equities.

• Preserved final salary scheme transfer of 850,000 with certificate tax-free cash of £200,000.

• His basic annual expenditure excluding his pension contribution is £40,000. In addition to this he pays maintenance to Marianne of £20,000 pa.

• Discretionary trust set up in 1990 for the benefit of his three children from his first marriage; being run by a discretionary fund manager and investing in a mixture of FTSE 100 companies and blue chip international companies. The discretionary trust is currently valued at £3 million. Rupert is not sure of the underlying fund charges but has received a letter setting out that they are estimated to be £20,000 pa. No new contributions have been made since May 1992 when Rupert paid in £500,000.

• His will, made when he was married to Marianne, leaves everything to her and then in equal shares to his five children.


Rupert wants to set up a separate trust for the benefit of John and Sylvia only; he is not on good terms with Marianne. He wants to keep all the arrangements separate from the discretionary trust. He is prepared to invest £500,000 initially. He does not want anyone else to be able to access this money and wants it protected from the children until they reach aged 18. He is also considering paying in another £100,000 to the existing discretionary trust once the new trust for John and Sylvia is set up. Rupert describes himself as a relatively adventurous investor and is happy for the new trust monies to be invested for long term capital growth in equities.

Our 1000 word Financial Plan!

Obviously there will always be several ways to skin the proverbial cat and this in no way constitutes individual financial advice, but here's what Roger and Jon thought might be a good approach to help the fictional Rupert.

Financial Plan for Rupert Ball

Your Current Situation

You are at a crossroads in your life now the settlement from your divorce is finalised and it seems like a very good time to re-evaluate your financial position and perhaps think about what direction you would like to take going forward.

You have a comfortable amount of wealth and successful career with generous benefits. You have enough wealth to cover all eventualities and want to make provision for your five children for the future.


  • Make provision for John and Sylvia, the children from your second marriage
  • In a trust separate from the older trust which makes discretionary provision for the three children from your first marriage.
  • To make John and Sylvia the sole beneficiaries, with access from age 18
  • Potentially paying £100,000 into the original trust for the children from your first marriage


• Your current employment situation is secure and stable
• You consider yourself to be in good general health
• Judging by your current investment portfolio you are an adventurous and experienced investor , but this should be explored further with a risk profiling exercise
• Judging by the wealth you have set aside already your capacity for loss should be relatively high. See cashflow appendix illustrating a significant market downturn and the minimal impact on your financial position.
• You and Marianne are divorced by Decree Absolute
• You Will your home to your children
• Retirement age of 60 assumed.

Optional Strategies

• First, place £100,000 as a chargeable lifetime transfer into a NEW Discretionary Trust for three elder children. This Trust then has its own allowances to offset against future taxation.
• Second, set up a new Bare Trust with John and Sylvia as beneficiaries at 18. Place £500,000 in the trust. Gifting into this trust second means there will be no immediate tax charge and the Potentially Exempt Transfer will fall from your estate in 7 years.

Investment Strategy

• 100% international equities for capital growth as the young children will have at least 13 years before they can access the funds

• May consider alternative strategy for the older children but as the existing Discretionary Trust is also in a higher risk environment it would be wise to consider the old and the new trust together if there was a change of investment strategy

Other considerations


• It would be interesting to discuss your future plans and lifestyle and discover how you plan to enjoy your wealth. 45 is a good time to reassess the direction you would like to take, especially following a big life change such as divorce

Inheritance Tax

• You state your basic annual expenditure is £60,000 which would indicate you will have considerable surplus income. We should complete a cash flow analysis to confirm the level of acceptable gifting. We could also look to use the revenue principle “gifts from normal expenditure out of income” to help reduce any further estate growth from your surplus income.

• The gift within your existing Will to your estranged wife will fail because of your divorce. If your intention was to make provision for Marianne, under intestacy law she will receive nothing as you aren’t married any longer. We suggest you draw up a new Will as soon as possible which make your wishes clear

• Consider insuring your gifts, with a life insurance policy written in Trust. This would help to mitigate any inheritance tax on the gifts should you pass away in the 7 years after making the gift. The premiums might be more expensive than average owing to the fact you are a smoker. The premiums could be around £680p.a.

• I have calculated your current net worth to be approximately £5.2m

• Assuming you had passed away yesterday, there could have been a potential tax liability of approximately £1,900,000.

• Assuming you didn’t insure the gifts, insurance could be considered to cover your total inheritance tax liability going forward. For instance a whole of life policy written in a Trust to cover the tax payable. Again, the premiums may be more expensive than average as you are a smoker, circa £22,000p.a


• Current Pension provision will likely be in breach of the Lifetime Allowance at some point in the future. Consider looking at Individual Protection 2016 depending on the values at April 2016
• Given your current contribution levels to your Pension scheme are £12,000p.a (gross) and as earnings are well in excess of £210,000, the tapered annual allowance is an issue when it comes to Pension funding. It would be useful to know the terms on which your employer will contribute and what their current level of contributions are so we can try to minimise the impact of overfunding your Pension.
• You must ensure pension expression of wishes are in place and up to date to ensure that your Pensions pass to the relevant people in the event of your death.


• The cash return rate of 4%p.a may suggest these aren’t all invested in deposit accounts and carry excess risk. This should be reviewed as a priority along with the exact level of cash you need to hold as emergency funds. Anything surplus could be considered for investment.
• Consider alternative strategy using VCT or EIS for alternative tax benefits.
• Review DFM charges against performance and consider value for money.

Financial Planning is not regulated, however investment advice is. We would conduct a full review of individual circumstances before giving advice. Cashflow modelling software was used in the formulation of this plan.

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