Hello, and welcome to the latest Insightful Planning with Astute video. I’m Stephen Spencer, a Financial Planner here at Astute Private Wealth, and I’m here to show you how I worked with a client to help him achieve his goals.

With my client’s permission, I’d like to take you through his situation. As a courtesy, I have changed some details for anonymity; allow me to introduce you to William.

William is 67, and works part time as a Park Ranger, earning £12,300. In 2016, William sadly lost his wife, and spends a lot of time with his family. Together, they play football, regularly go swimming, and get their money’s worth out of their Chester Zoo membership! William also spends a lot of his time taking walks along the coast and fishing in the Irish Sea.

William is a longstanding client of mine, and we have worked together for well over 15 years. Over that time, we have utilised cashflow forecasting (with plenty of tweaks and changes along the way). Most recently, we have focused on the transition to retirement – specifically, identifying how comfortable William could be during life after work.

His current monthly expenditure is £2,100, which is significantly more than his monthly employed income of just over £1,000. The remainder of his income is supplemented by a final salary pension paid by a previous employer’s scheme, and his state pension which has been built into his cashflow plan.

Looking ahead, we discussed the lifestyle that William would like to lead and calculated that he would need circa £30,000 per annum gross (before tax) to cover his lifestyle costs. This includes provision to replace his car every 5 years. Given how well William looks after his cars, and the age and make he typically looks for, £5,000 provision every 5 years is suitable.

We compared purchasing the car via a finance agreement vs buying outright. If William finances the car, then he will need a higher flow of income each month and will have a lump sum from the proceeds of the car sale. If William buys the car outright, he will need to have an easily accessible pot of circa £5,000 at the time he needs it.

He has secure pension income of £22,500 per annum from his final salary scheme and State Pension, and has a £240,000 personal pension that can be utilised to supplement his income. He also has £25,000 in cash – £5,000 of this is to be allocated to an upcoming car purchase, and the remainder a comfortable fund to be utilised in an emergency.

Let’s take a look at the cashflow forecast that we put together for William. Here you can see William’s expenditure requirements every year between now and age 100. Generally, these will rise with inflation, and you can see every 5 years where there is an extra provision for replacing his car.

The chart is all red right now because we haven’t added any income or capital withdrawals in. We can do that by adding them one at a time now, starting with his earned income. We’ve modelled his income stopping this year, so that we can see whether he can afford to retire or not, and so you can see the blue bars stopping almost straight away. The green, which is the final salary scheme, and the dark blue, which is the State Pension, continue for the rest of William’s life. Aside from these, any remaining shortfall will need to be covered by William’s other savings, and we can finally add these in now. The orange shows William drawing an income from his personal pension. The fact that the orange continues for the rest of William’s life means that his pension fund is never expected to run out, meaning financial security can be achieved.

In the forecast, we built in a fictitious market “shock” of 16%, that is a fall in his investments at outset that reflects a “worst-case scenario” for his investments. This allows us to forecast what will happen to William’s finances should markets fall, and whether a fall in value would impact his standard of living. Under these simulations, the plan remains robust.

Our cashflow forecasting shows that William can comfortably retire now. However, he won’t. William currently has enough leisure time to enjoy quality time with his granddaughters and long weekends in North Wales. He works part-time, but his work doesn’t only provide him with an income. As a Park Ranger, he enjoys getting out and about, and being a key part of the community. He has fantastic colleagues and gets fulfilment from his role. His cashflow forecast gives him the confidence that, should any of this change, he is able to leave his role and live comfortably – he can stay in his role for as long as this is true.

Thanks for joining me. If you have any questions, please don’t hesitate to get in touch. We’ll see you next time.