About You ​
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Wealth is to be enjoyed. Whether you are spending it or accumulating it, wealth never stands still. Effective financial management ensures that your wealth will help you to meet your goals and do the things you want. E L Watson can offer bespoke advice to help you achieve this through a comprehensive assessment of your objectives and review of your finances.
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We appreciate that the various separate areas of financial planning can rarely be viewed in isolation; they invariably need to be considered in unison as part of a holistic financial review if the best solution is to be achieved. However, we have summarized below some real-life cases we have dealt with recently for our clients. These demonstrate some of the individual areas on which we advise and may give you an insight into how our advice process can help you.
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Click on the introductions below to read how we were able to help these people with their different queries.
"I am a successful business owner. I have built my company and now I want to make sure I can plan my exit from the business. I am concerned about paying too much tax and I need to make sure I will have a good level of income in retirement."
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We work closely with Mr A’s accountant and were introduced by them. Having developed a thriving business he had received a substantial offer from a competitor. His accountant had created a structure to minimise Capital Gains Tax. We were asked to work within the accountants framework to create a low risk, highly tax efficient investment portfolio.
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The investments we made have appreciated in value providing the scope for both our client and his family to receive a sustainable high level of income for many years to come.
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Mr A had built up a reasonable pension fund during the time he was running his company and by working closely with his accountant we were able to advise on a large payment into his pension fund before the sale of his business. This led to a considerable tax saving and a substantial increase in his pension funds.
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By using a wide range of instruments and investment solutions, we have helped Mr A safeguard the proceeds of his hard work for the long term. Although there is a lot of work behind the scenes, he is now busy setting up a new venture and is happy to leave the daily pensions and investment work to us. He is kept informed of developments and knows that through regular review meetings, his changing financial needs can always be met.
"I am going through a divorce and I am worried whether my children and I will be financially secure."
Mrs E was referred to us by the solicitor dealing with her divorce. She had taken a career break following the birth of two children whilst her husband continued with a successful career. We assisted her solicitor in calculating a fair financial settlement by analysing Mr E’s assets including 3 pension schemes. The objective was to secure an income now, for Mrs E to raise her children, and also for her in retirement in the future.
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Once the divorce was finalised we were able to secure Mrs E’s financial position by taking a number of important measures. Firstly we arranged life insurance against the death of Mr E for the benefit of Mrs. E and her children. This provided the security that, even in the event of the death of Mr E, an income to replace the maintenance order would continue until the children were financially independent.
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We arranged a pension plan for Mrs E so that she could receive a share of Mr E’s substantial pension funds. This gave her confidence that she would be provided for in later life. The divorce settlement included an immediate lump sum payment. We arranged a number of investments to give Mrs E an emergency fund which would eventually be used to increase her income without causing any tax liability.
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We now regularly review Mrs E’s investment and pension portfolios to make sure they reflect her requirements. Our exhaustive investment review process ensures that she does not get any “nasty surprises” from her investments. We meet on a regular basis to discuss any changes in her circumstances and provide reassurance that we will always be there to deal with her financial affairs.
"My elderly mother was recently widowed. She has a large estate and is very worried about leaving a large Inheritance Tax liability. She has discussed this with me and her other beneficiaries but we are concerned that she should always have enough income to live on comfortably."
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Mrs G’s husband had accumulated an estate of over £1 million by the time of his death. He dealt with all the family finances but had not taken any measures to reduce the Inheritance Tax on the event of the subsequent death of Mrs G.
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We initially valued Mrs G’s estate and also looked closely at her income situation. Some of Mr G’s pensions ceased on his death and we identified a shortfall in income for Mrs G. Mrs G was very concerned that the family wealth would be lost to tax on her death whilst her two sons were anxious to see that she could continue to live a comfortable retirement.
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Having identified Mrs G’s overall needs, we advised and then implemented a strategy of investment to reduce Inheritance Tax to zero and produce an attractive level of income for her.
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We have used a range of investment products and tax wrappers including Discounted Gift Trusts, Enterprise Investment Scheme and Forestry and Farming Funds. Within two years we will have saved Mrs G’s beneficiaries over £250,000 of Inheritance Tax and produced an annual income of over £15,000 for her.
"My late father left some money to his family on his death. Part of this was in a trust which he set up some years before. There are several family members who can benefit from this trust and I am unsure as to how these funds should be used or invested."
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When he set up the trust, the late Mr L specified beneficiaries and appointed his two sons as trustees. We started by obtaining a copy of the trust deed and established the type of trust (discretionary), the named and potential beneficiaries, the terms of the trust and the settlor’s (the late Mr L) wishes. We then established the beneficiaries’ personal circumstances and future objectives.
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One son required capital for a house purchase, so, we arranged for his share of the capital to be paid to him tax efficiently through the use of assignment and holdover tax-relief.
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The late Mr L’s other son did not currently require his share of the trust fund, so we agreed that this would be invested instead to help meet his childrens’ future education costs, thus bypassing his own estate for IHT purposes. Mr L’s widow required a high level of income over her lifetime to be generated from her share of the capital and we implemented an appropriate investment strategy.
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The very different requirements for the capital of Mr L’s son and widow were met by establishing two separate investment bonds within the trust, thus ing their respective portfolios to have totally separate investment strategies and greatly facilitating the trust accounts. This strategy has also helped to minimize tax and gives maximum investment flexibility.
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We have managed these portfolios for several years and meet the trustees each year to ensure that these portfolios remain well-suited to the beneficiaries’ changing objectives.
"Having worked for forty years in industry, I have managed to build up a reasonable pension fund. I will want to retire within the next few years and need to know what my options are."
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In common with many people, Mr P had amassed several different pensions over his working life, some of which were old schemes invested in uncompetitive with-profits funds paying little or no return. These pensions had never been reviewed and together, amounted to a reasonable pension fund.
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We started by reviewing Mr P’s circumstances and objectives. He leads a ‘modest’ lifestyle and is unmarried, although he has a partner. His income is currently more than sufficient for his needs but he clearly requires advice on his pension strategy.
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We provided Mr P with a summary of his options with regard to his retirement planning, including the benefits he could expect to receive through the different types of pension such as annuities and unsecured pension. We explained the respective advantages and disadvantages of each method and discussed which would best meet his requirements.
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Mr P is planning to take some part-time work in his retirement and would like some flexibility in how much pension income he takes, and when. He is also concerned that his partner receives maximum benefit from his pension when he dies, as she currently has little pension provision of her own.
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It was ultimately decided that Mr P should transfer his pensions to a SIPP and that he would take his pension benefits through ‘unsecured pension’. He is happy to take some risk with his pension fund and the additional flexibility USP confers fits well with his part time work. In addition, Mr P wanted the death benefits for his partner which USP allow; the annuity route was far less attractive in this respect for an unmarried spouse.
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We review Mr P’s portfolio twice-yearly and carefully manage the risk/reward balance to ensure his pension fund has good on-going growth potential capable of giving Mr P a sustainable or growing pension income in the future.
"I am a partner in a very successful business and although my earnings fluctuate I class myself as a high earner. My wife doesn’t work and we have two young children, a large mortgage and a few other liabilities. I am concerned that my wife would struggle financially should I die and that there would be major financial issues should I be unable to work due to illness or injury."
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A full review was carried out for Mr & Mrs J to establish their overall financial circumstances. They had very little life cover in place and no cover at all in relation to income protection or critical illness. Because Mr J was very well paid he was able to accept all recommendations for mortgage protection with critical illness together with income protection should he be unable to work due to illness or injury and family income benefit to provide income should he die.
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The peace of mind that this package generated was much appreciated by Mr & Mrs J. What they did not realise at the time was how fortunate they were to have accepted the recommendations. Within a year of taking out the policies, Mr J had a serious heart attack which resulted in him requiring a quadruple heart by-pass operation. He was 38 at the time and had no history of heart problems.
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The critical illness policy paid out and repaid the mortgage with a substantial amount left over and the income protection paid a monthly income until Mr R was deemed fit to return to work. As he had a significant sum left over from the critical illness policy he did not return to work immediately. Instead, with the agreement of his employer, he spent a further two months with his family and went back to work when he felt the time was right.
"My husband died earlier this year very suddenly. He had always handled our finances whilst I looked after the home and our children. Because he died so suddenly we didn’t have time to discuss our finances and what investments or insurance policies we had. I was therefore very worried about my income situation as I had no recent work experience to call on."
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Fortunately Mrs Y’s husband had arranged life assurance policies to cover the remaining mortgage and had also made a number of astute investments over the years. As well as personal assets he also had a 50% share in a business, was a member of his company death in service scheme and had a number of personal pension policies.
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Mrs Y’s children were both at university and she needed advice and assistance in order to provide an income which meant she didn’t have to struggle to support herself and her children. Once the business assets were sold and proceeds of the insurance policies and company death in service scheme were received we met Mrs Y at her home to discuss her requirements and to assess her overall situation. We ensured that the mortgage was repaid and that there were no other debts prior to making investment recommendations.
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Mrs Y was extremely worried until we were able to discuss and explain how we could invest her husbands assets to provide her with a regular income. Using tax efficient investments we were able to provide her with more than enough income whilst minimising her personal Income Tax and Capital Gains Tax. She had enough income to continue to help her children through university and sufficient capital to repay their student loans.
"With the introduction of Auto-enrolment by the Government, we were concerned that we had to have a compliant scheme in place before our 'staging date'. This is a complex process and the penalties for non-compliance of these rules can be severe, so we wanted a suitable scheme setting up quickly and efficiently"
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We met with GH Limited purely to discuss their auto enrolment requirements. We were able to advise the MD of the company's regulatory requirements and timescales to comply with legislation. We also discussed the overall cost and the type of offering they wanted to offer their workforce along with the existing arrangements that were already in place.
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Following our discussions GH Limited provided us with their payroll data. This enabled us to assess the workforce and the cost using the regulator's salary definitions. It also gave us the ability to go to the open market to obtain terms from providers. Once this work was complete we presented a report to GH Limited confirming our specific recommendations.
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Following the presentation of this report GH Limited agreed to proceed with our recommendations and the application for the scheme was submitted.
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Following this process of advice to GH Limited, we also committed to meet with the workforce to introduce auto enrolment to them. This gave the workforce an understanding of why it was happening and explained the process that their employer had gone through with us to establish the scheme. This introduction was done by a series of group presentations and discussions. One to one meetings were also offered to individuals where requested.
Having implemented the scheme, further presentations were undertaken closer to the joining date to allow the workforce to raise any concerns pending the first contribution.
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The scheme is now fully implemented with all employees joined. The company is happy to have complied with all the rules in this complex area and the workforce are also pleased with their new pension scheme.
Want to know more?​
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Call us for a friendly chat on 01943 871638 or email: info@watsonfp.com
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