Andrew, 61 years old, and Clare, 59 years old, are a married couple

Andrew, 61 years old, and Clare, 59 years old, are a married couple. They have no children and their parents have died. Both are considering retirement and they want to have a chat with their financial adviser on their retirement options. Both have a High Attitude to Risk, and they have High Capacity for Loss. Clare has a Defined Contribution pension plan from her work that is currently worth £1.25mm (she has been able to access this pension from the age of 55). Andrew has a Defined Benefits pension from his work, and he can access it from the age of 65. His final salary will be £3k per month and its value will grow up with inflation. Finally, Clare also has £150,000 in her cash ISA that may be used for her retirement. They have no mortgage or other liabilities. They want to have a nice lifestyle during their retirement and do some extra travelling. They expect that they will need approximately £4k per month to live on. They are even considering buying a small holiday property in Spain for approximately £250,000. Please explain to them what their options are if they want to retire now, and which option would be the most appropriate for them. As a financial adviser, make sure you ask any questions needed before you make your recommendation. (Word Limit 500 words) (25 points)

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Expert Answer

Data Given in question:-

Andrew and Clare are a married couple.

Andrew (61 years old) has a Defined Benefits pension from his work, and he can access it from the age of 65. His final salary will be £3k per month and its value will grow up with inflation.

Clare (59 years old) has a Defined Contribution pension plan from her work that is currently worth £1.25mm (she has been able to access this pension from the age of 55).Clare also has £150,000 in her cash ISA that may be used for her retirement.

They will need approximately £4k per month to live on and approximately £250,000 for buying a small holiday property in Spain.

Solution Required:

What will be most appropriate option for retirement planning.

Solution:

Optioin 1

For purchasing property of £250,000 make payment of £150,000 from Cash available with Clare and withdraw remaining £100,000 from defined Contribution pension plan.

Currently monthly living expenses of £4k will be managed from pension.

Option 2

For purchase of property made entire withdrawl of £250,000 from defined Contribution pension plan and meet monthly expenses from cash balance available with clare. After retirement of andrew he will receive £3k per month use that salary for monthly expenses

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