Posted: 21/05/21

Lots of our clients focus their time on running their own businesses, but they don’t take the time to focus on their finances. They want to have a plan for how they can exit from their business, but they don’t know how much they should save, or the most effective way to do it.

Andrew and Kevin had both worked as employees of companies in the travel sector, but in 1998 they decided to start their own business. They each invested £15,000 of their own money and they started their company with a single product - the Fun Plane.

Both having previously worked for 10-15 years in the travel sector, they were well connected and were soon able to get their product listed with some of the largest airlines in the world. They went on to develop their product to include airline branding and expanded their product range into model airline kits.

In 2002, when their business had started to ‘take-off’, they both opened up pensions and, over the next decade, they invested an average of £40,000 per annum into each of their pensions. They used funds from their limited company to make these contributions and so were able to transfer wealth from their business to their pension without paying any tax.

The difference financial planning with purpose can make

It was in 2012 that we first met with Andrew & Kevin as, although they had been making the sensible decision to build up their pension funds, they had yet to make any progress in terms of investment growth.

We sat down with Andrew and Kevin and their wives and we started asking them questions about what they wanted to achieve, so that we could set some goals and make a plan. It was important to understand their business, their families and also their full financial circumstances. This allowed us to begin to plan with purpose and really give direction to their financial planning.

Their business was a big driver for their wealth, and they had earned well from it so far, but they were not yet wealthy enough, or old enough, to consider retiring. The first consideration was the extent to which they wanted to eliminate or reduce the risks relating to the business. We introduced a Chartered Tax Adviser to work alongside us and created new articles of association, a robust shareholder agreement and insurance cover for them as key people in the business and as shareholders. This package of measures made sure that whatever happened between now and retirement Andrew, Kevin and their families would be financially secure.

We met a couple of times each year to refine and reconfirm their goals and made lots of small but important adjustments along the way. Having a plan gave them real purpose, and by trusting us to set things up in the right way for them, allowed them to just get on and live their lives to the full.

Make hay while the sun shines

Their business was very much reliant on passengers buying their products in airports and onboard airlines. In 2018, for the first time, they saw their turnover fall, but they rationalised their product portfolio, were able to remain profitable and continued funding their pensions. However, they could see that the best years were behind them and the way consumers spend when they travel was changing. We were able to confirm that they were on track with meeting their goals and could afford to retire now, but we agreed to work towards retirement within the next 5 years.

Well, we all know what happened in 2020 and the impact this had on the travel industry. This effectively called time on their business and a voluntary liquidation was undertaken. Having made sure all of their staff and customers were well looked after, they were then able to draw the remaining cash in the business using business asset disposal relief rules.

The great news is that, with many years of transferring money from the business to their pensions, they were both able to retire from the business with pension funds in excess of £1m. In addition to that, we had also made sure along the way that other tax allowances had been utilised, as well as balancing the wealth between them and their wives. This has meant that both couples have retired with the ability to meet their retirement income goals and with the minimum of tax paid along the way and payable in retirement, all in a legal and ethical way.

The best time to make a plan is today

Plans change, but having a plan ensures you make decisions with purpose and then, when the time is right, you can transition with confidence to the retirement you have dreamt of.

We all lead busy lives and so many things get in the way of us taking the time to plan for the future. At David James Wealth we listen, we help you to create a plan and then we partner with you for the long term to make this a reality.

Anything worth having takes time to build, but without a plan the building never even starts. By working with David James Wealth, you can begin to plan for your future with real purpose, today.

Been thinking you should have a plan for your retirement?

Talk everything over with our team. We’re ready to listen.

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Let us know your plans

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Let us know your plans

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