“We thought we were years away.
Turned out we weren’t.”

The situation

Mark and Susan

Mark was 59 and had spent his career in manufacturing. He had built up a solid pension and used his ISA allowance most years. He also had £540,000 of inherited cash, which had sat in a savings account for seven years because he didn't want to invest it badly.

Susan, 57, had worked part-time since their youngest left home. She had a small income, a small defined benefit pension and no debt.

Between them they had more than they realised.

Eighteen months earlier, on a friend's recommendation, Mark had met another adviser. The proposal set out a fee of 1% of everything invested, a restricted fund range and a retirement date of 65, possibly 63. It didn't include a cashflow model or a plan for drawing an income.

Mark came across Blincoe while looking into fixed-fee advisers. A fee that rose with the portfolio had sat less comfortably with him the longer he thought about it.

He was a nice bloke. We spent the hour talking about funds and hardly talked about us at all.

Mark, on the adviser he met first

The plan

Four parts to the plan

Investing the inherited cash

The cash came first. It had earned little for seven years, and how it was split would shape their tax position for decades.

Both ISA allowances went in straight away: £40,000 into stocks and shares ISAs. We made pension contributions for both of them, using carry-forward of unused annual allowance from earlier years. Some went into a general investment account (GIA). The largest share went into an offshore investment bond.

Inside an offshore bond, investments grow without UK income tax or capital gains tax being deducted each year. Tax is deferred until money is taken out, so growth has longer to compound over a long retirement, and the bond gives a flexible source of income later on.

The order income is drawn

Until State Pension starts at 67, income comes from four sources in this order.

1. Pension, up to the personal allowance

   A quarter of each pension withdrawal is usually free of income tax. We size each year's withdrawal so the taxable three quarters fits within Mark's personal allowance (£12,570), so this income carries little or no income tax.

2. GIA, up to the CGT allowance

   Each year we sell enough from the GIA to use the annual CGT exempt amount, which can't be carried forward. The amount is small, but over ten years it keeps down a gain that would otherwise keep building.

3. Offshore bond, 5% a year

   HMRC rules allow up to 5% of the amount invested to be withdrawn each year, on a cumulative basis for up to 20 years, with no immediate tax charge. Tax is deferred until the bond is cashed in. On a large bond, that is a steady income in the background.

4. ISA, drawn last

   Nothing is taxed on the way out, so there is no reason to use it early. Leaving it alone keeps a pot available later, for care costs or to pass on.

Between them, the four sources cover the £6,000 a month Mark and Susan want to spend. The aim is to pay no more tax than the rules require in any year.

Guardrails

With the structure in place, we added risk-based guardrails. Each year we score how sustainable their spending is, given what markets have done. The score falls into a zone, and each zone has a response that was agreed before Mark retired.

That was the bit that landed most for me. I'd always worried about retiring into a bad year and making the wrong call in a panic. Now I know what we'd do before it happens.

Mark

At retirement their score was 82%, in the Surplus Zone. How the guardrails framework works

I spent years thinking I needed to understand every detail before I could decide anything. What I needed was someone I trusted to tell me we were ready. We were.

Mark