Client Journey

How TFP Calculators can assist you with your clients’ journey.

Following the completion of the factfind, the client’s current situation can be established by calculating their net spendable income (Income Tax) to determine whether there is any surplus income above their outgoings (Income & Expenditure), and to calculate any potential IHT liability (IHT).

The client’s objective of providing sufficient income in retirement will be clarified (Cashflow), and pension options discussed regarding any shortfall in the target income (Pension Funding). The provision of other lifetime goals, such as school fees planning (Education), will be determined and prioritised (Goals). The advantages of funding for goals sooner rather than later can be demonstrated (Cost of Delay).

Investing to achieve goals may involve a comparison of collectives v onshore bonds and offshore bonds (Investment Wrappers). Collectives may initially be selected with an amount being encashed each year to invest into an ISA to achieve greater tax efficiency (Funding ISA). When an amount is surrendered from an investment, the tax liability, if any, will need to be calculated on the collective (CGT), bond (Bond) or more than one bond (Multiple Bond) .

The client may be self employed and considering trading as a limited company (Incorporate). The different options for extracting profits can be discussed (Profit Extraction), including the advantages of taking dividends rather than salary (Salary vs Dividends) and employing the spouse (Employ Spouse).

Planning for a comfortable retirement will involve choosing the right plan which includes a comparison of charges (Charges), and how a pension compares to an ISA (Pension v ISA). The client may maximise pension contributions by utilising unused annual allowances (Carry Forward) on which effective rates of tax relief of up to 63.75% can be obtained (Income Tax). The advantages of salary sacrifice to increase contributions can also be demonstrated (Salary Sacrifice). Plus the client may want to invest their pension fund in a property, and the feasibility of this can be outlined (Property Purchase). When funding pension benefits, care should be taken that the client’s total pension fund at crystallisation does not exceed the Standard Lifetime Allowance and incur tax charges (SLA). It may be possible to protect a higher lifetime limit by applying for Individual Protection 2014 or 2016 (IP).

To supplement pension in retirement, ‘income’ can be provided in a tax efficient way from the different wrappers which the client has funded during their working lifetime (Retirement Wrappers). This ‘income’ could be generated by way of regular part disposals from a portfolio of collectives (Part Disposals)

Normally, the client will want to take the maximum PCLS from their pension plan (PCLS). However if Pre A Day the client had more than one ‘occupational’ pension scheme with the same employer, the PCLS will need to be apportioned between those arrangements (Apportion PCLS).

With the remaining fund the client might want to consider deferring taking an income (Defer) or purchasing an annuity and compare the different ancillary benefits that can be provided (Annuity comparison).

If the client is looking to take then pension as a lump sum, then they might want to consider the tax implications compared to ‘phasing’ it out over a number of years (UFPLS options). Alternatively, the client may also look at different options at retirement and how the annuity compares to Flexi Access Drawdown, (‘Capped’ Drawdown if applicable), and/or if the client does not initially need the PCLS, then Phased Drawdown should be considered (Retirement Options) or Phased Uncrystallised Fund Pension Lump Sum (Partial UFPLS). Of course, with the new Flexible Pension Withdrawal rules the client might want to use different options and levels of income (FPW). If no pension planning has been done, then immediate vesting pension planning could be considered (Immediate).

If the client is already in ‘Capped’ Drawdown, they will need to know the level of income that can be taken or the impact at review (GAD) to ensure they do not trigger the Money Purchase Annual Allowance. If the client is not taking the maximum income allowable, then consideration should be given to the advantages of ‘recycling’ unused income back into a pension to obtain further entitlement to PCLS (Recycle). For Drawdown clients, at age 75 or on annuity purchase if earlier, there will be a second Benefit Crystallisation Event where a potential tax charge could arise (2nd BCE).

For older clients, IHT planning may be required which might involve making chargeable lifetime transfers or potential exempt transfers (IHT gift calculator), and using arrangements such as Loan Trusts (Loan Trust).