Money makeover: "We want to protect our family and plan for retirement"

31 January 2017

This article was written in response to a reader’s financial situation. If you need a financial makeover get in touch at

Peter, 48, earns just over £19,000 a year as a self-employed landscape gardener, as well as £6,000 a year in dividends from his role as a director of a marketing company in the construction sector – he doesn’t take a salary from this position.

Toni, 50, earns just over £10,000 a year working part-time for a Post Office branch inside a Waitrose supermarket. They’re also in receipt of child benefit, which is worth just over £1,600 a year.

Peter and Toni became mortgage-free in January and are keen to find out how best to use these monthly savings to ensure they’re set up for retirement. They have also accrued five different pension pots between them over the years – worth a current combined total of £52,595. They want to know if the pensions are worth keeping and if they can be consolidated – as they feel it would be easier to manage if they’re all in one place.


They also have a Halifax endowment policy in place for another four years, which includes life and critical illness cover. But as their mortgage has now been repaid in full, they’re not sure whether it is worth keeping.

In addition, they have existing cash savings of £77,000, £180 invested with Cofunds, and £2,600 invested in the John Lewis Share Save scheme.

Alan Tytherleigh (above), an independent financial adviser at Odyssey Wealth Management in Milton Keynes, Buckinghamshire, has stepped in to help the couple. Alan specialises in investment and retirement planning advice, while Odyssey Wealth provides independent advice on investments, pensions, protection (personal and business), estate
planning and mortgages. Here is what he recommends.

Consolidate pensions and contribute more

Both Peter and Toni would like to retire by their state pension age, which will be 67 in both of their cases. They would retire earlier if it was financially feasible to do so, and they would like to maintain the same standard of living as present in retirement.

Peter has just over £2,200 in a Friends Life personal pension, £5,200 in an L&G personal pension, and £19,100 in a Phoenix personal pension.

I have analysed these existing schemes looking at a range of factors including the costs, the investment options available within the schemes, and any specific enhancements or guarantees that may be available.

I would recommend transferring all three of these pensions to one provider – Aviva, which has a more suitable plan.

Peter’s three current pensions all have the highest risk profile associated with them – 10/10 compared to Peter’s risk profile of 6/10. Aviva’s Pension Portfolio Choice option offers a tracker fund called Vanguard Lifestrategy 60% (part of the Moneywise First 50 Funds selection), which matches Peter’s moderate risk profile.


The options for different investments within the existing pensions also aren’t strong deals for Peter, plus there are no fees to transfer his pensions.

As Peter and Toni have cleared their mortgage, they now have an income surplus of £500 a month. So I recommend that Peter starts contributing into the new Aviva pension fund with a regular monthly payment of £180. This will be topped up through tax relief to the tune of £45, meaning a total payment of £225 will be made into the pension fund each month.

Toni, meanwhile, has just over £28,600 in a Royal London With Profits personal pension and £400 in a John Lewis defined contribution (DC) group personal pension.

I recommend Toni leaves the Royal London pension in place for the time being. Although the declared bonus rate has been low over the past few years, I would consider it prudent to wait and see the 2016 declarations before deciding on moving this pension.

In terms of her John Lewis Partnership DC workplace pension scheme, I recommend she continues to pay into this from her salary. 

Peter and Toni say: “When you have so many policies, you pay into them each month but, other than that, they sit there dormant and you don’t have the time to effectively manage them. It has been really helpful to get an understanding of the different pension schemes and to hear Alan’s advice on what to do with them – we will definitely go ahead with his suggestions.”

Cancel endowment and invest surplus income

I recommend that Peter and Toni surrender their Halifax endowment, as the current investment risk is exceptionally high. They should invest the £33,000 proceeds into a stocks and shares Isa, each making use of their full 2016/17 Isa allowance. This is currently £15,240 per person. The Isa should invest in the Vanguard Lifestrategy 60% fund.

The remaining proceeds should be invested in an Aviva general investment account, and should then be used to fund their Isas from the new tax year in April.

Peter and Toni do not want the inflexibility of all their savings being tied up into a pension and only accessible from age 55. So I recommend they use £250 a month of their income surplus to contribute to this general investment account initially and then also redirect the payments into a stocks and shares Isa after the tax year ends.

The advantage of this is that the Isa can pay out a tax-free income in retirement. The £180 that Peter has invested in a Cofunds general investment account should also be consolidated into this new Aviva general investment account and then put into an Isa. There is a minor capital gain on this policy. However, it is more than covered by Peter’s annual tax-free capital gains allowance of £11,100. He is not expected to have any other gains in this tax year.


Peter and Toni say: “We want to keep our cash savings as emergency funds and we don’t want over-exposure to the stock market. But this balanced approach of investing some of our surplus income into an Isa, as well as regularly adding to Peter’s pension, makes sense.

“We do have a few concerns about whether there is some kind of end-of-term bonus from our endowment policy that may mean it’s worth hanging on to for the next four years. We will speak to Alan for clarification on this.”


Replace protection policies

Peter has life cover of £100,000 with AXA for the next 11 years. The couple also has separate income protection policies, as well as a joint Halifax endowment, which includes £53,200 critical illness cover and £53,200 worth of life cover. These policies combined cost just over £130 a month in total.

I’ve analysed all of the policies for coverage, price and terms. I would recommend replacing all of the policies with the following: a Joint Family Income Benefit policy and a decreasing joint life and critical illness policy from L&G. These policies cover the couple for a higher sum, which is made up of £24,500 a year from the Family Income Benefit and £125,000 life an  critical illness respectively. They also have longer terms, meaning Peter and Toni are covered until their children leave full-time education.

In addition, it’s worth the couple considering putting the life and critical illness policy in trust although it will need to be structured slightly differently in this scenario. This means it falls outside their estate when it comes to inheritance tax purposes. If the worst happens, payment will be quicker as there is no probate process to go through to access money in a trust.

I also recommend Peter takes out a Holloway Friendly income protection policy until his state pension retirement age. These three policies would cost just over £200 a month in total, but the couple can cover the extra £70 a month with their income surplus.

Of course, they should only cancel the existing policies once the new cover is up and running. Peter and Toni have not made a new will since they fi rst bought a home, and this was before they got married and had children, so I therefore recommend they have a new one drawn up – the current one will now be invalid.

Peter and Toni say: “It makes complete sense for us to switch to stronger protection products, as once our endowment ends the only cover we will have in place is Peter’s life cover policy. We will also definitely look to update our will.”


Key recommendations for Peter & Toni 

  • Consolidate some of their existing pensions
  • Peter needs to start contributing to a pension
  • Begin investing surplus income
  • Cancel their endowment policy and invest the funds into an Isa
  • Get higher levels of life and income protection cover
  • Update their will


On the makeover as a whole, the couple says: “Overall, we’re really pleased with the thorough job Alan has done. He has addressed all of our concerns and made good recommendations, which for the most part we’ll take up.”

Alan adds: “The best part of the review was being able to demonstrate to Peter and Toni that they already have their retirement goals covered. They now also have the flexibility to retire a number of years before 67 without any drop in their standard of living.”

None of the above should be regarded as advice. It is general information based on a fi nancial report conducted by Alan Tytherleigh at Odyssey Wealth Management in Milton Keynes, Buckinghamshire.

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This article was written in response to a reader’s financial situation.

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