Newcastle University AF5007: Personal Finance Wealth Planning Report

This report presents a comprehensive financial plan for Richard and Stephanie Dando, addressing their objectives and current financial situation. It analyzes their assets, liabilities, income, and expenditure, including pensions, investments, and potential inheritance. The report identifies key issues such as the absence of a will, lack of communication regarding inheritance, and limited understanding of tax implications like capital gains tax. Recommendations include drafting a will, clarifying inheritance plans, and exploring investment strategies. The report also covers topics such as life assurance, the 2015 pension freedom, and retirement planning, providing an overview of key recommendations for the Dando family to achieve their financial goals and secure their future. The report also includes a detailed analysis of their income and expenditure, highlighting their current financial habits and the need for savings and investment strategies. Furthermore, the report provides insights into the couples' retirement plans and potential tax implications, offering recommendations to optimize their financial position. The report also addresses the importance of estate planning and the potential impact of inheritance on their financial well-being.

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Table of Contents
A) Discussion of the couple’s objectives with reference to timescale..............................................3
B) Logical flow and structure of content.................................................................................................4
B) Evidence of research to form recommendations.........................................................................8
D) Case study relevance and use of up to date material.........................................................................9
E) coverage of issues in the case study at the appropriate level of depth to include an overview of
key recommendations to be expanded on in this report.......................................................................10
References............................................................................................................................................14

A) Discussion of the couple’s objectives with reference to timescale.
Their main objectives are:
i. Ensure their properties are well inherited- this can only be done by writing
a will. In witting a will you need the following ("Retirement Planning & Financial
Planning Software", n.d.) :
 You need a document to write you will.
 At the beginning you need to write “ Last Will and Testament”
 Write your full legal names and address.
 Designate an executor.
 Appoint a guardian.
 Name the beneficiaries.
 Designate the assets.
 Store your will in a safe place.
ii) Ensure they pay statutory deductions to avoid any problem with the tax department in
the government. This includes payment of tax on capital gain (Tahoun & van Lent, 2018).
Calculated as follows:
Selling price of Stephanie’s small flat in England now
£ 210,000
Purchase price of Stephanie’s small flat in England
£62,000
Less Depreciation for the Period of 5years (if given)
(£XXX) (£62,000)
Capital Gain
1£48,000
Tax on capital gained using latest tax rate % *148,000
£XXXX
This capital gain then needs to be submitted on time to government revenue authority.

iii) Ensure they have a well retirement plan. By doing this they have a pension scheme.
In UK, pension is mandatory for working people. Currently men can claim their state
pension from 65 years while women can claim their pension at the age of 62years and
6months.Both will then increase gradually to 66 by 2020 and 67 between 2026 and 2028. Each
year of NICs gives entitlement to 1/30the of the full basic state pension. State Pension cannot be
taken up before the State Pension age, but may be deferred in return for higher State Pension of
10.4% per year of deferral or a one-off lump sum payment with interest annually at 2% above the
bank of England base rate (Chlebikova, Misankova & Kramarova, 2015).
iv) Ensure they have a life assurance scheme. This is to ensure that you family gets what
they miss when you are gone (dead). They need to get peace of mind by receiving quick and easy
compensation each month to sort out what they need in your absence (Chlebikova, Misankova &
Kramarova, 2015). They need to get a good life assurance scheme which will ensure that the
family you leave behind is looked after well. The right cover will cover your needs whether you
want life insurance, mortgage life insurance or critical illness cover.
v) Ensure that they understand well on 2015 pension freedom scheme. This was
introduced in April 2015. Under this reform, people aged 55 or over were given far greater
freedom over how to access their contribution pension posts. This had a right to give people
choice of what to do with their own savings. They have a right to access cash, securities and
investment returns (Chlebikova, Misankova & Kramarova, 2015).
B) Logical flow and structure of content.
This is effective transitions tend to work together. This is smooth, orderly and logical
transitions from one idea to another. In this case we need to arrange each financial income,
expenditure and their assets. We also need to arrange the sequences of inheritance for all of the
persons in this report. We need also to arrange the ownership flow of assets (Doda & Fortuzi,
2015).
Assets, Liabilities, inheritance, benefits for Richard only
Assets Amount (£)
His pension at 58 now 19,740 p.a

Lump sum 19,740 *3 59,220
Totals transfer of his pension 550,000
Benefits accrued on National Health 24,520
Life assurance 53,500
Grandfather inheritance 17,000
Assets, Liabilities, inheritance, benefits for Stephanie only
Assets Amount (£)
Pension of 10.2% 50,100
Sun life Finance 74,800
Small Flat (Before tax) 210,000
Painting (Before tax) 19,000
Credit Card 7,700
Assets, Liabilities, inheritance, benefits owned by both Richard and Stephanie only
Assets Amount (£)
House 320,000
Mortgage (950 P.M) 22,000
Car loan ( 205 P.M) 11,500
Assets, Liabilities, inheritance, benefits for Olivia
Assets Amount (£)
Savings 5,000
Gross salary 25,000

Assets to be inherited by Richard and Steven from Richards father
Assets Amount (£)
Property 250,000
Assets to be inherited by Stephanie and her sister from their parents
Assets Amount (£)
Large house 1,200,000
Cash Based investment 175,000
Summary
Name A
sset(£)
Li
ability (£)
Insu
rance(£)
L.
Assurance($)
Inh
eritance (£)
Sal
ary
Richar
d
574,
520
53,50
0
17,
000
28,
500 P.A
Stepha
nie
22
9,000
7,
700
124,
99
50,
100 P.A
For
both Richard
and Stephanie
32
0,000
33
,500
For
Olivia
5,
000
25,
000 P.A
For
Richard and
Steven
25
0,000
For
Stephanie and
her sister
1,
375,000

Calculation of income and expenditure for both Richard and Stephanie for current
year.
Net Income £
4,310
£
51,720
Expenditure:
Mortgage
Utilities
Food
Car loan
Petrol and car related expenses
Insurances
Social expenses
Council tax
Season ticket for Newcastle United
Miscellaneous (includes credit card)
Holidays
£
950
£
180
£
600
£
205
£
430
£
50
£
600
£
145
£
50
£
400
£
700
Total expenditure £
4,310
5
1,720
Savings 0 0

 This show that they spend every coin they earn. They don’t make a saving
except the one made in their pension schemes.
 This also shows that they cannot be able to increase their expenditure
beyond the above schedule.
 It’s not unless they think of an income strategy for them to be able to think
of adding and expense.
B) Evidence of research to form recommendations.
i) Will. They both don’t understand of will testament. Richard and Stephanie says they
don’t understand about the will.
ii) Lack of communication. There is no proper communication among the couples. They
don’t understand how inheritance will be distributed. They don’t look at their age. At this point
in time they should have written a will. For instance Richard’s father doesn’t explain how both
his son Richard and Steven his brother will share the £250,000 in case he dies. He has grown old
enough to make decision of his inheritance to avoid conflicts and war over resources of the
deceased ("Financial health | Planning personal finances | Fidelity", n.d.). This is the same
mistakes that are being inherited even by Richard and Stephanie.
iii) The mare truth. It’s very true that between Richard and Stephanie, one has to die first
and leave the other with the wealth. But they are not ready to speak this truth and put their house
in order always. Stephanie says that if she dies, Richard will inherit her properties or in the case
both are not there Emily and Olivia will inherit their wealthy.
iv) No addition of more expenditure. According to the income and expenditure shown,
Richard and Stephanie have exhausted their income the whole year. They cannot think to add
any expense in their list ("Financial health | Planning personal finances | Fidelity", n.d.).
v) Inheritance. Richard and Stephanie have made their mind on whom to inherit their
wealth in case they are dead and gone. Richard has a daughter Olivia and Stephanie has a niece
Emily. According to the research, they have made their mind to inherit them but they have not
stated in case they are no more how they will share the wealth.

vi) Fear to start a business investment. Both of them, Richard and Stephanie fear to risk
in investing in a portfolio since they fear losing the capital in case the portfolio does not succeed.
Richard fears that he has grown old and he can’t indulge in business. He says that he does not
have the passion to do business but has a passion of sports ("Financial Planning and Wealth
Management | Personal Capital", n.d.). He is inherently risk averse. He has invested on the local
premium bonds and some cash in ISA and the remainder in savings account for many years but
very small interest earned for the period. This shows that he is inherent risk averse. Stephanie in
the other hand want to sell the house he bought and the painting but fears to start a portfolio for
her niece. She fears the risk involved. She says that she is very busy.
D) Case study relevance and use of up to date material
 In this case we investigate on the couples in this real-life context. In the
case study, it’s true that the couples do not have children together. No one is complaining
about this matter. Not well explained why they happen to be living without the children
and no complain.
 It is also material that Richard has a child Olivia. It is in the context that
Stephanie is also aware of this fact and she is not complaining.
 The inheritance of Richard’s father £250,000 is to be shared among the
two- Richard and Steven a brother to Richard’s father. All we don’t understand is if
Steven is aware of this fact. All we know is that Richard wants to inherit all the money
for himself saying that by the time his father dies, his uncle will be in USA and will not
be able know about the inheritance. All we don’t understand is, if Richards’s father has a
secret will which Richard doesn’t know ("Financial Planning and Wealth Management |
Personal Capital", n.d.).
 It is evident from the context that Richard and Stephanie don’t have a will.
All that is said is that both would like to inherit their assets when they die and have
assumed this will happen. Eventuality may arise from the day to day happenings and
change the mare truth in their mind.
 It is evident that Richard is to retire two years to come. He is 58 years now
but we are not told the present age of Stephanie as at now. We also understand that
Richard is older than Stephanie. Their age difference will be able to make us make some
decisions. For example on inheritance. If Stephanie is too young who knows if she will

be married again if Richard dies first. We cannot be able to make a decision of pension
for Stephanie ("Personal Finance - Investing, Planning, Retirement, Tax ...", n.d.).
 It is evident from the context that Stephanie does not understand tax on
capital gain. This is a very crucial item that Stephanie should understand. All she knows
is to sell the house on profit. She cannot make decision on this income because she does
not know how much will be left to her after tax.
 From the context the two couples do not understand about the 2015
pension freedoms. They just had heard it in the media. This is accessing the pension at
the age of 55 years and makes decision on it ("Personal Finance - Investing, Planning,
Retirement, Tax ...", n.d.).
E) coverage of issues in the case study at the appropriate level of depth to include an
overview of key recommendations to be expanded on in this report.
Issues in the case study include:
i) Will Testament.
ii) Inheritance.
iii) Tax on Capital gain.
iv) Life assurances.
v) 2015 pension freedom.
vi) Income and expenditure.
vii) Asset ownership.
viii) Retirement period.
ix) After retirement what next.
x) Consequences early retirement.
xi) Tax on capital investment.
Level of depth and overview of recommendations of the issues above.
i) Will Testament
This is well shown in the context by Richard and Stephanie.

Our recommendation is that a will to be drafted
ii) Inheritance
This is shown on the context by the couples and their parents.
A recommendation is that should be well elaborated in the will. This is to avoid conflict
of interest in case of death ("Personal Finance - MSN Money", n.d.).
iii) Tax on capital gain
This is well stipulated in the context than Stephanie does not know if it is required to be
paid and how.
We recommend that tax on capital gain should be paid on the present government tax on
capital gain rate ("Personal Finance Definition - Investopedia", n.d.).
iv) Life assurance
It is well shown in the context by Richard. He has a life assurance cover.
We recommended that he ensures that the cover meets his needs and wishes. This is
important so as when he is gone, the one left behind will be able push on with life without a
problem ("Personal Finance - MSN Money", n.d.).
v) 2015 Pension Freedom
Richard and Stephanie have heard about this idea of 2015 Pension Freedom in the media
but they don’t understand how it works.
Our recommendation is that this pension is giving an individual access to the pension at
the age of 55 years. This is early retirement scheme. This will reduce the pension amount for an
individual.
vi) Income and Expenditure

The income and expenditure of Richard and Stephanie is well stipulated in the context.
They spend 100% of their net income for the whole month. They don’t have any savings on
emergencies ("Personal Finance: Wealth News, Money Tips, Personal ...", n.d.).
Our recommendations are that they cut on expenses and at least have a little saving on
their income and should be put in the savings account. This will help if emergencies arises.
vii) Asset ownership
Some asset is not well explained on the percentage ownership. For example the house
Richard and Stephanie lives in. It is not well defined. Another one is the one owned by the
parents of Stephanie is not well defined the share of Stephanie and her sister. Another one is the
one owned by Richard’s father how they will share among the two- Richard and his uncle Steven
("Personal Financial Planning (Wealth Management)", n.d.).
Our recommendation is that all the assets should be well defined the ownership. This
should be done when the mind is sober. Sometime old people may be confused on decision
making. So they should do it when their mind is sober.
viii) Retirement period
Retirement period in UK is 60 years. Early retirement is a decision made by an individual
based on their reasons. However this has an implication on their pension. It will reduce the
amount anticipated at the normal retirement and other benefits thereof.
Our recommendation is that if there is no any forcing issue, one to wait normal retirement
of 60 years. This will ensure one receives his/her full pension and benefits ("Personal Financial
Planning - TTU", n.d.).
ix) After retirement what next
This is a question asked by Richard. He is 58 years and will retire soon after two years.
He is trying to calculate what he will do next. He says that he is good at his work but is a keen
sportsman and would love to have more time to devote to training and competing.

Our suggestion is that after retirement let one do what he loves most as long as he/she
earns to their expectation.
x) Consequences of early retirement
This is 2015 Pension Freedom. Stephanie wants to retire early. She does not want to
retire very old. At 55 years old. This will make her access her pension early and loose some
benefits ("Personal financial services: PwC", n.d.).
Our recommendation is that if Stephanie is intending to do some business which will
generate more than what she will lose if she retires earl, then it is all right.
xi) Tax on capital investment
This should be paid as the revenue authority recommends avoiding any penalty.

References
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Doda, S., & Fortuzi, S. (2015). The Process of Financial Planning in Personal
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10.5296/ijhrs.v5i4.8636
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https://www.fidelity.com/viewpoints/personal-finance/financial-health
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