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The Importance of financial planning


Important - The information shown is not personal advice, if you are unsure of the suitability of an investment for your circumstances please contact us for personal advice. Tax rules can change and benefits depend on personal circumstances.

Planning 101: DIY is great. Sometimes it’s better left to the pros.

Financial planning can be a bit like DIY. There are some things which are easy to tackle yourself but other things which are better left to the experts in case you get it wrong.

For example, it’s easy enough to plan saving for something like a new car. If you miss your target, it’s not the end of the world. But when it comes to planning something important such as your retirement, most of us can’t afford to put a foot wrong.

Like DIY, financial planning is time consuming and the longer you put it off, the more the jobs build up and it becomes unmanageable.

But you don’t have to do it alone. There’s a local HL financial adviser who can do the hard work for you. Together you can plan your financial future and feel more confident knowing that a professional has taken care of every detail.

Bruce Pearce
Head of Advisory Services

You and the wealth curve

If only life was as smooth as the curve below. Your wealth will go up and down as markets rise and fall in value and you reach points of higher expenditure. Everyone’s circumstances will be different but the general trend on this chart shows the rate at which we accumulate wealth up until we retire then use that wealth thereafter.

Using an adviser to help you plan for the future can help you understand where you are and give you a plan to reach your goals. That way, you can feel more confident about the future.

Building and using wealth at different age milestones

Important information: This chart is just an illustration of how wealth could be built and used over time, your personal circumstances may be different.


Key mile stones to plan for

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Bruce Pearce
Head of Advisory Services

Key milestones to plan for

There are a lot of variables when it comes to planning and it can be hard to see how one action affects another. That’s where an adviser can help you untangle all the ‘what-ifs’ and provide a clear plan.

Here are some key milestones and things to remember to plan for:

Pre 45

  1. You’re likely to be near your peak earning power. But that also means you’ll probably be paying more tax. Tax rules change and affect everyone differently. This makes it tricky to create a tax efficient plan but an adviser can help you navigate the rules.
  2. Don’t ignore your retirement. It might feel a long way off and it’s easy to spend your cash rather than save it. But it’s essential to plan early and save as hard as you can. Even small tweaks can make a big difference later on.
  3. Cash flow is king. As well as peak earning power, you may also be at peak levels of responsibility. it’s essential to plan how you’ll save for this and how it will affect your cash flow when the time comes.

Age 55

  1. You’re now that much closer to retirement that what you do next really matters. Now is when you should have a plan in place for how you intend to access your pension and generate income in retirement.
  2. Cash flow is still important. For example, if you want to help your children onto the property ladder, you’ll need a plan to do so without jeopardising your retirement and your own standard of living.

Age 65

  1. You may be just about to retire or planning to in the next couple of years. You’ll need to plan how much you’ll need each month when you retire and where you’re going to get it from. It’s now you’ll need to make some complicated decisions on whether a secure income such as an annuity is the right course of action or if you’d generate enough income from drawing down from your pension.
  2. You may also have to think about later life care. This isn’t an easy thing to plan for emotionally or financially but as the charges can be quite high, it’s essential to have assets earmarked for this. Also consider nominating a lasting power of attorney.
  3. Now could also be the time to start inheritance tax planning. If you leave it too late to do this, some tax efficient ways to pass on your wealth come off the table.

Age 75

  1. If you’ve left it this late to plan how you’ll pass on your wealth, all is not lost. But this really is the point when you need to think about inheritance tax. Inheritance tax rules can change and apply differently depending on your circumstances. All of which can make them confusing. So, it’s important to ask an adviser to help you if you need it.
  2. What happens if you or your partner dies? It’s not a nice thing to have to plan for but unfortunately, it can’t be ignored. It can be confusing to work out how to get all your affairs in order to make sure your loved ones are cared for and in a strong financial position.

How financial advice helped Mr and Mrs Taylor

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Bruce Pearce
Head of Advisory Services

How financial advice helped Mr and Mrs Taylor

Cash flow is key to understanding when retirement is possible. I put together a cash flow model which, I’m happy to say, indicated they could retire early based on the assets they had.

Case study by HL adviser, Gary Morgan

Mr Taylor was an owner of his own business with Mrs Taylor also having share holdings. Mr Taylor had a long commute and was fed up with constant travel. Understandably, this made him keen to retire as early as possible and spend more time at their second property.

For some clients, retiring early can seem risky and Mr and Mrs Taylor wanted to make sure they wouldn’t run out of money if Mr Taylor retired early. They asked me to take a look at their situation and provide a clear plan to help them achieve their goal and provide them with peace of mind.

Mr Taylor had accumulated a number of assets through cash, ISA’s and SIPPs. He also had money within his business and a number of defined benefit pensions at his disposal.

Cash flow is key to understanding when retirement is possible. I put together a cash flow model which, I’m happy to say, indicated they could retire early based on the assets they had. I was even able to show that their children could still inherit sizable assets.

A cornerstone of the advice I gave the couple was about utilising their assets in a tax efficient way. This helped them feel more comfortable that they had enough ‘in the tank’ to keep them going even if Mr Taylor retired early. Here are a few things I suggested based on their circumstances and attitude to risk. Tax rules can change and any benefits will depend on your personal circumstances.

  1. Use cash accumulated in Mr Taylor’s business by making contributions into both of their pensions. This meant a triple tax saving on corporation tax, National insurance and personal tax.
  2. Mr Taylor was also able to draw tax free income from the business using his personal allowance and dividends allowance. Any additional income will be drawn via dividends at a lower rate of tax for each person. This means the majority of income from the business will be taken tax free.
  3. The couple were then able to cover any shortfalls using ISA accounts and cash. So far, no tax has been paid on this income source.

To help Mr and Mrs Taylor feel more confident about where their income would be coming from, I created this plan for them. Here’s an outline.

  1. We could see the income from the business would finish at age 55. The couple would then call on each of their pensions using lump sums. They would take enough income while remaining under the tax threshold with the ability to take more if required.
  2. Then, Mr Taylor’s final salary pension would kick in at age 65. Along with income generated from ISAs, cash and SIPPs.
  3. At age 67 a combination of state, final salary and SIPP natural income would allow them to live the retirement life they always wanted.

I’m happy to say Mr Taylor has now retired at age 53 and is pleased to see the back of that long commute. It was great working with the couple over the course of a number of meetings. I was able to present various cash flow models and settle on a plan which meant little to no tax will be paid until age 55 at the earliest.


Important information: What you do with your pension is an important decision that you might not be able to change. You should check you're making the right decision for your circumstances and that you understand all your options and their risks. The government's free and impartial Pension Wise service can help you and we can offer you advice if you’d like it.


Get a clear financial plan you can be confident in

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Bruce Pearce
Head of Advisory Services

Get a clear financial plan you can be confident in

Financial planning advice can take away some of the stress and uncertainty around your financial future.

Use our service to help you:

  • Save time
  • Reduce uncertainty
  • Be confident about the future

We can help you do that by:

  • Revisiting or setting financial goals
  • Creating a plan to achieve long and short term goals
  • Explaining the changes you’ll need to make as you approach mile stones such as retirement
  • Navigate complex tax and pension rules
  • Earmarking assets so they can be used when you need them throughout your life

Start by booking a call with our advisory helpdesk

Our helpdesk are here to answer your questions (and ask a few of their own) to make sure you’ll see true value from taking financial planning advice. So, if you’re as happy doing your DIY as you are planning your finances, we’ll point you in the direction of free information on our website to help you plan your future.

Our helpdesk won’t provide personalised advice but they’re an essential part of our advice service in making sure it’s the right option for you. If you decide to proceed, charges will apply and they’ll put you in touch with an adviser within two working days.

Book a call

Our advisers are not tax advisers. For complicated tax calculations please contact a tax adviser.

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