Assignment
This assignment is devised to help you obtain the learning outcomes as stated in the module handbook. It is in 3 parts: Team Performance; Team Contribution and Individual Performance.
In groups of between five and seven which will be allocated to you, you are required to read the information given to you about Olivia and John Smith and from all the information given:
Team Performance
Written element – 2700 words
Produce a report to summarise the current position of Olivia and John. Include suggestions to increase current net income, summarise the couple’s goals and discuss potential future liabilities. You report should include but not necessarily be limited to:
1. Summarise the objectives and priorities of Olivia and John Smith
2. Produce and summarise a net worth statement for the couple
3. Calculate income for both and jointly including tax computations based on their current position to identify after tax net income
4. Calculate income after expenditure for each and jointly.
5. Calculate funding projections required to fulfil the couples objectives and for risk protection.
6. Comment on any ethical issues that you may need to consider.
7. A summary of assumptions (rates and returns used to prepare recommendations) and justification for using these.
Presentation element – Produce and be prepared to discuss a poster for display.
This should give your recommended course of action for the couple and explain why and how this course of action meets their objectives and minimises their tax obligations. It should cover retirement planning, risk protection, estate planning and at least one other of your clients’ objectives. This poster needs to comply with the information in your written report.
The Case Study
Olivia and JohnSmith
Interview Notes: Olivia and JohnSmith – 30thSeptember 2015.
Olivia and John have been married happily for 35years. They met whilst Olivia was working in Italy but decided to live in the UK once they had their family. They have 2 daughters, Christina and Amelie. Amelie married 3 years ago and has two children. Christina is engaged and has booked her wedding for next August. Olivia and John would like to help with the cost in the most tax efficient way possible.
Olivia works as a self employed dentist and has a property which she lets out on a long term basis. They both love nature and the outdoors and make regular charitable contributions to these organisations for which John has signed the Gift Aid forms.
John is employed as a shop manager at the local grocery store.
John’s brother died in February 2015 and her will states that he will receive £40,000 made up as follows:
Cash deposits of £15,000
Royal Bank of Scotland shares approximate value £10,000
HSBC Shares approximate value £15,000
John expects to receive the bequest in the next couple of months and would like to know how best to invest this money to provide for holidays for the whole family and any unforeseen disasters to ensure their financial security for the years to come.
Currently John pays into his company pension plan which is a defined contribution plan. He is interested in making some additional voluntary contributions to improve his pension when he retires at the age of 62. Olivia has not been contributing to a pension as she was previously self- employed and thought that the sale of her rental property would fund her retirement. She is hoping for some further advice as she has heard that this is not a sensible approach.
Olivia and John would like to help their grandchildren save for the future and would like some advice on the most tax efficient ways to give to him although they do not wish to jeopardise their own financial security to do so.
Whilst they are both in good health at the moment they do not wish to be a financial burden on their family and would like to ensure that they can afford to pay for long term care should they need to. They would like to stay together as long as possible, preferably in their own home.
Confidential Questionnaire
(Personal)
1. General Information Date: 30th September 2015
Full Name Status Date of Birth
Self OliviaSmith M 13.03.59
Spouse JohnSmith M 09.05.60
Child 1 Christina Smith S 11.04.87
Child 2 Amelie Di Capello M 04.04.89
Grandchild 1 Francesco Di Capello S 21.09.2011
Grandchild 2 Caterina Di Capello S 16.10.2013
Is there anyone financially reliant on you? No
Occupation Olivia Dentist
Smith Shop Manager
Correspondence 52 The Elms
Pocklington
North Yorkshire
YO13 5BG Phone:
01423 524343 Email: SESmith@hotmail.com
2. Assets (approximate values)
Self Joint Spouse Income Generating
Main residence 600,000
Second house 200,000 £400 per month
Contents/ Personal effects 20,000 20,000
Bank Accounts
Building Society deposits
TESSAs 4,000 16,000 2%
National Savings index linked savings certificates 30,000 2%
Quoted shares 20,000 5%
Gilts and fixed interest securities
Unit trusts
Business Assets
Anticipated Inheritance 40,000 Approx. 4%
Other assets
House owned as joint tenants or tenants in common? Joint tenants
3. Liabilities (approximate values)
Mortgage outstanding 250,000
Overdraft
Other loans 5,000
Other personal credit:credit card 6,000
4. Employment Self Partner
Name of firm Maple Dental Green’s grocers
Director or partner? No No
Shareholding No No
Salary 50,000 26,000
5. Benefits in Kind
Car (scale charge) 2600 (40% private use) 1,400
Medical expenses 240
Share option scheme
6. Pension Scheme
Final salary or money purchase? None Money purchase
Normal retirement age 65
Scheme contracted in or out? In
Years in scheme 25
Employers contribution 5%
Members contribution 5%
Death in service lump sum 3 times salary
Spouse’s pension – in service 50%
Spouse’s pension – in retirement 50%
7. Retirement Planning
Pension funds Green’s Grocer’s Retirement fund
Preserved pension funds
Free standing AVC’s.
When would you like to retire? 63 62
8. Taxation
Country of residence
May this change? If so when?
Country of Domicile
Tax district and reference
National Insurance Number
9. Gifts (Chargeable or PET for IHT)
Date Nature of gift Value To whom
25th August 2009 Cash £12,000 Amelie for her wedding
20th September 2010 Cash £1,000 Amelie on birth of son
10th October 2012 Cash £1,000 Amelie on birth of daughter
10. Wills (give main provisions and supply copies if possible)
Mirror wills drawn up in 2005 with £5,000 to World Wildlife Fund and remainder to partner. If no partner then remainder split equally between children.
11. Health Self Spouse
State of health Good Good
Do you smoke? No No
Hazardous Activities No No
12. Investment
Do you have strong feeling regarding particular investments?
Yes. We would like them to be made in companies with good ethical and environmental policies.
Anticipated Liabilities? Already given.
13. Objectives
Importance Requirements
Family Security – on your death 1
£200,000
– On partner/spouse’s death 1
– on disability 1
– on partner/spouse’s disability 1
Retirement planning 2 Annual Joint Income of £40,000
Funds to pay for long term care.
Estate Planning 4 Minimise IHT; protect grandchildren’s inheritance
Savings for grandchildren 5 £20,000 in today’s money each by 18 years.
Holiday in America 5 Lump sum in today’s money of £10,000
Purchase of holiday home 5 Lump sum in today’s money of £250,000
Clients’ Attitude to Risk
How concerned are you about the risk of financial loss to you/your beneficiaries/your business caused by:
1. Untimely death?
Olivia and John: Not concerned.
2. Critical illness/disability?
Olivia and John: Very concerned.
3. Medium- to longer-term sickness/disability?
Olivia and John: Very concerned.
4. Needing long-term care in old age?
Olivia and John: Concerned.
Lump sum investment risk
1. Are you prepared to accept that capital/contributions may fall in value and, ifso, with how much of your capital can you afford to risk a short-term fall in thevalue in pursuit of medium- to long-term growth?
Olivia and John: Yes, up to 20%.
2. Of this amount, how much would you wish to invest in higher-risk investmentswhere there may be the prospect of higher returns but also a risk of long-termcapital loss?
Olivia and John:About 50%.
3. To how much of your capital/contributions do you require access and overwhat timescale?
Olivia and John:Purchase of property on retirement.
4. How much of your capital/contributions do you need to protect against inflationand over what timescale?
Olivia and John: As much as possible to achieve objectives.
5. How much of your capital/contributions do you wish to generate growth and ifso what rate(s) and over what timescale?
Olivia and John: Property purchase fund. Savings for grandchildrenuntil theyare 18 years old.
6. Does this apply to any special purposes; if not, please explain any differencesin approach?
Olivia and John: N/A
Regular Savings Investment Risk
7. Are you prepared to accept that capital/contributions may fall in value and, ifso, with how much of your capital can you afford to risk a short-term fall in thevalue in pursuit of medium- to long-term growth?
Olivia and John: Yes, up to 20%.
8. Of this amount, how much would you wish to invest in higher-risk investmentswhere there may be the prospect of higher returns but also a risk of long-termcapital loss?
Olivia and John: As little as possible.
9. To how much of your capital/ contributions do you require access and overwhat timescale?
Olivia and John: Wedding of Christina in August 2016. Holiday for whole family (Christina and spouse, Amelie and family) to Disneyland, Florida in April 2017.
10. How much of your capital /contributions do you need to protect against inflationand over what timescale?
Olivia and John: As much as possible to achieve objectives.
11. How much of your capital/contributions do you wish to generate growth and ifso what rate(s) and over what timescale?
Olivia and John:Medium term investments until retirement.
12. Does this apply to any special purposes; if not, please explain any differencesin approach?
Olivia and John: N/A
Client Investment Risk Attitude Summary
Refer to definitions below and insert your name in the appropriate box to indicate
your risk attitude to investment risk for each objective.
Investment asset type
Risk attitude
Retirement (pension schemes) Long term Investment
Over 15 years Medium term investment and savings 5-15 years Short term savings up to 5 years
No Risk to capital
Low Risk John
Modest Risk Olivia Olivia and John
Relatively higher risk Olivia and John
High risk Olivia and John
No risk to capital – No risk of capital value and accept possible loss of real value
due to inflation.
Low risk – Low risk loss of capital but some inflationary risk to real value or return
based on fixed rate.
Modest risk – Generally small risk of real or comparative capital loss in pursuit of
longer-term capital growth.
Relatively higher risk – Some risk of real or comparative capital loss in pursuit of
longer-term capital growth.
High risk – High risk of capital loss in pursuit of growth.
TAKE ADVANTAGE OF OUR PROMOTIONAL DISCOUNT DISPLAYED ON THE WEBSITE AND GET A DISCOUNT FOR YOUR PAPER NOW!